Econometric Modelling of Time Series with Outlying Observations
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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.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Article
- Periodicity, Non-stationarity, and Forecasting of Economic and Financial Time Series: Editors' Introduction
- Consideration of Trends in Time Series
- Detecting Common Dynamics in Transitory Components
- Nonparametric Tests for Periodic Integration
- Nearly Efficient Likelihood Ratio Tests for Seasonal Unit Roots
- Econometric Modelling of Time Series with Outlying Observations
- Forecasting Annual Inflation with Seasonal Monthly Data: Using Levels versus Logs of the Underlying Price Index
- Evaluating Automatic Model Selection
- On a Graphical Technique for Evaluating Some Rational Expectations Models
- Modeling the Volatility-Return Trade-Off When Volatility May Be Nonstationary
- HYBRID GARCH Models and Intra-Daily Return Periodicity
Articles in the same Issue
- Article
- Periodicity, Non-stationarity, and Forecasting of Economic and Financial Time Series: Editors' Introduction
- Consideration of Trends in Time Series
- Detecting Common Dynamics in Transitory Components
- Nonparametric Tests for Periodic Integration
- Nearly Efficient Likelihood Ratio Tests for Seasonal Unit Roots
- Econometric Modelling of Time Series with Outlying Observations
- Forecasting Annual Inflation with Seasonal Monthly Data: Using Levels versus Logs of the Underlying Price Index
- Evaluating Automatic Model Selection
- On a Graphical Technique for Evaluating Some Rational Expectations Models
- Modeling the Volatility-Return Trade-Off When Volatility May Be Nonstationary
- HYBRID GARCH Models and Intra-Daily Return Periodicity
