A Call for Out-of-Sample Testing in Macroeconomics

16 Pages Posted: 14 Feb 2016

See all articles by Robert Gelfond

Robert Gelfond

MQS Management LLC.

Ryan Murphy

Southern Methodist University (SMU)

Date Written: February 13, 2016

Abstract

Social science has come under a firestorm of criticism following the discovery that many findings cannot be replicated. This paper argues that increasing the use of out-of-sample tests would improve the reliability of findings in all fields, including “complex” fields such as macroeconomics. It illustrates the paucity of examples of this method by reviewing the literature on the government spending multiplier. Two out-of-sample tests in academic papers from the 1960s were identified, along with a procedure similar to an out-of-sample test in a forthcoming paper by Jorda and Taylor.

Keywords: Out-of-Sample Testing, Macroeconomics, Fiscal Multipliers

JEL Classification: B40, E00

Suggested Citation

Gelfond, Robert and Murphy, Ryan, A Call for Out-of-Sample Testing in Macroeconomics (February 13, 2016). Available at SSRN: https://ssrn.com/abstract=2732099 or http://dx.doi.org/10.2139/ssrn.2732099

Robert Gelfond

MQS Management LLC. ( email )

11 East 26th Street
7th Floor
New York, NY 10010
United States

Ryan Murphy (Contact Author)

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

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