The Fragility of Sensitivity Analysis: An Encompassing Perspective

20 Pages Posted: 2 Dec 2008

See all articles by Neil R. Ericsson

Neil R. Ericsson

Board of Governors of the Federal Reserve System

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Date Written: 0000

Abstract

Robustness and fragility in Leamer's sense are defined with respect to a particular coefficient over a class of models. This paper shows that inclusion of the data generation process in that class of models is neither necessary nor sufficient for robustness. This result holds even if the properly specified model has well-determined, statistically significant coefficients. The encompassing principle explains how this result can occur. Encompassing also provides a link to a more common-sense notion of robustness, which is still a desirable property empirically; and encompassing clarifies recent discussion on model averaging and the pooling of forecasts.

Suggested Citation

Ericsson, Neil R., The Fragility of Sensitivity Analysis: An Encompassing Perspective (0000). Oxford Bulletin of Economics and Statistics, Vol. 70, Issue s1, pp. 895-914, December 2008, Available at SSRN: https://ssrn.com/abstract=1307317 or http://dx.doi.org/10.1111/j.1468-0084.2008.00535.x

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