Model selection for explosive models
This paper examines the limit properties of information criteria for distinguishing between the unit root model and the various kinds of explosive models. The information criteria include AIC, BIC, HQIC. The explosive models include the local-to-unit-root model, the mildly explosive model and the re...
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sg-smu-ink.soe_research-28002019-04-20T02:16:45Z Model selection for explosive models TAO, Yubo Jun YU, This paper examines the limit properties of information criteria for distinguishing between the unit root model and the various kinds of explosive models. The information criteria include AIC, BIC, HQIC. The explosive models include the local-to-unit-root model, the mildly explosive model and the regular explosive model. Initial conditions with different order of magnitude are considered. Both the OLS estimator and the indirect inference estimator are studied. It is found that BIC and HQIC, but not AIC, consistently select the unit root model when data come from the unit root model. When data come from the local-to-unit-root model, both BIC and HQIC select the wrong model with probability approaching 1 while AIC has a positive probability of selecting the right model in the limit. When data come from the regular explosive model or from the mildly explosive model in the form of 1+nα/n with α ϵ (0, 1), all three information criteria consistently select the true model. Indirect inference estimation can increase or decrease the probability for information criteria to select the right model asymptotically relative to OLS, depending on the information criteria and the true model. Simulation results confirm our asymptotic results in finite sample. 2016-03-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/soe_research/1801 https://ink.library.smu.edu.sg/context/soe_research/article/2800/viewcontent/P_ID_52783_06_2016.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Economics eng Institutional Knowledge at Singapore Management University Model Selection Information Criteria Local-to-unit-root Model Mildly Explosive Model Unit Root Model Indirect Inference. Econometrics Economic Theory |
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Model Selection Information Criteria Local-to-unit-root Model Mildly Explosive Model Unit Root Model Indirect Inference. Econometrics Economic Theory TAO, Yubo Jun YU, Model selection for explosive models |
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This paper examines the limit properties of information criteria for distinguishing between the unit root model and the various kinds of explosive models. The information criteria include AIC, BIC, HQIC. The explosive models include the local-to-unit-root model, the mildly explosive model and the regular explosive model. Initial conditions with different order of magnitude are considered. Both the OLS estimator and the indirect inference estimator are studied. It is found that BIC and HQIC, but not AIC, consistently select the unit root model when data come from the unit root model. When data come from the local-to-unit-root model, both BIC and HQIC select the wrong model with probability approaching 1 while AIC has a positive probability of selecting the right model in the limit. When data come from the regular explosive model or from the mildly explosive model in the form of 1+nα/n with α ϵ (0, 1), all three information criteria consistently select the true model. Indirect inference estimation can increase or decrease the probability for information criteria to select the right model asymptotically relative to OLS, depending on the information criteria and the true model. Simulation results confirm our asymptotic results in finite sample. |
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TAO, Yubo Jun YU, |
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TAO, Yubo Jun YU, |
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TAO, Yubo |
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Model selection for explosive models |
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Model selection for explosive models |
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Model selection for explosive models |
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Model selection for explosive models |
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Model selection for explosive models |
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model selection for explosive models |
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Institutional Knowledge at Singapore Management University |
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2016 |
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https://ink.library.smu.edu.sg/soe_research/1801 https://ink.library.smu.edu.sg/context/soe_research/article/2800/viewcontent/P_ID_52783_06_2016.pdf |
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