Econometric Model Selection

Selection and forecasting are integral to econometricmodelling but a unified treatment is rarely considered. This bookaddresses both issues, with an application to UK inflation. Thetheme of model selection underpins all chapters of the book. Thedevelopment of any econometric model requires model selection rulesbecause economic processes are extremely complex and the underlyingdata generating process is unknown. Furthermore, different modelselection rules may be required for in-sample modelling and forforecasting, when the data generating process is evolutionary,non-stationary, and unknown to the econometrician. This bookdevelops methods for selecting nonlinear models, proposing an easyto implement algorithm which circumvents identification problems,and builds equilibrium correction mechanisms of inflation toexamine their forecast performance against robust devices. The bookprovides a comprehensive treatment of model selection,demonstrating that general-to-specific selection tools are integralto modelling and forecasting in a non-stationary world, and shouldbe an invaluable read to those building econometric models forforecasting and policy evaluation.