Econometric modelling of time series with outlying observations
Econometric modelling of time series with outlying observations
Economies are buffeted by natural shocks, wars, policy changes, and other unanticipated events. Observed data can be subject to substantial revisions. Consequently, a “correct” theory can manifest serious mis-specification if just fitted to data ignoring its time-series characteristics. Modelling U.S. expenditure on food, the simplest theory implementation fails to describe the evidence. Embedding that theory in a general framework with dynamics, outliers and structural breaks and using impulse-indicator saturation, the selected model performs well, despite commencing with more variables than observations (see Doornik, 2009b), producing useful robust forecasts. Although this illustration involves a simple theory, the implications are generic and apply to sophisticated theories
Hendry, David F.
9c76f1f4-5773-4a45-9778-6ea40af72958
Mizon, Grayham E.
2b8353b4-0af4-48db-b552-6867dc1f4583
2011
Hendry, David F.
9c76f1f4-5773-4a45-9778-6ea40af72958
Mizon, Grayham E.
2b8353b4-0af4-48db-b552-6867dc1f4583
Hendry, David F. and Mizon, Grayham E.
(2011)
Econometric modelling of time series with outlying observations.
Journal of Time Series Econometrics, 3 (1).
(doi:10.2202/1941-1928.1100).
Abstract
Economies are buffeted by natural shocks, wars, policy changes, and other unanticipated events. Observed data can be subject to substantial revisions. Consequently, a “correct” theory can manifest serious mis-specification if just fitted to data ignoring its time-series characteristics. Modelling U.S. expenditure on food, the simplest theory implementation fails to describe the evidence. Embedding that theory in a general framework with dynamics, outliers and structural breaks and using impulse-indicator saturation, the selected model performs well, despite commencing with more variables than observations (see Doornik, 2009b), producing useful robust forecasts. Although this illustration involves a simple theory, the implications are generic and apply to sophisticated theories
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MizonHendryFoodFn.pdf
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Published date: 2011
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Local EPrints ID: 184439
URI: http://eprints.soton.ac.uk/id/eprint/184439
ISSN: 1941-1928
PURE UUID: ebaac63c-d5ca-488f-83eb-23cd02b4d226
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Date deposited: 09 May 2011 11:14
Last modified: 14 Mar 2024 03:08
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Author:
David F. Hendry
Author:
Grayham E. Mizon
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