Modelling economies in transition: an introduction

Hall, Stephen G.; Mizon, Grayham E.; Welfe, Aleksander

doi:10.1016/s0264-9993(99)00042-5

Cited by 12 publications

(1 citation statement)

References 49 publications

(40 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This is typical, for instance, of phenomena undergoing constant and endemic change (see Hall, 1997). Under these circumstances, constant-parameters models are likely to break down, especially if they are used for forecasting, and models with time-varying parameters should be used instead.…”

Section: Implications For Econometric Modellingmentioning

confidence: 99%

Unit roots versus other types of time heterogeneity, parameter time dependence and superexogeneity

Caporale

Pittis

2002

Journal of Forecasting

View full text Add to dashboard Cite

This paper stresses the restrictive nature of the standard unit root/cointegration assumptions and examines a more general type of time heterogeneity, which might characterize a number of economic variables, and which results in parameter time dependence and misleading statistical inference. We show that in such cases 'operational' models cannot be obtained, and the estimation of time-varying parameter models becomes necessary. For instance, economic processes subject to endemic change can only be adequately modelled in a state space form. This is a very important point, because unstable models will break down when used for forecasting purposes. We also discuss a new test for the null of cointegration developed by Quintos and Phillips (1993), which is based on parameter constancy in cointegrating regressions. Finally, we point out that, if it is possible to condition on a subset of superexogenous variables, parameter instability can be handled by estimating a restricted system.

show abstract

Section: Implications For Econometric Modellingmentioning

confidence: 99%