Model Comparisons in Unstable Environments

24 Pages Posted: 29 Apr 2016

See all articles by Raffaella Giacomini

Raffaella Giacomini

University College London - Department of Economics; University of California, Los Angeles - Department of Economics

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Barcelona Graduate School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2016

Abstract

The goal of this article is to develop formal tests to evaluate the relative in‐sample performance of two competing, misspecified, nonnested models in the presence of possible data instability. Compared to previous approaches to model selection, which are based on measures of global performance, we focus on the local relative performance of the models. We propose tests that are based on different measures of local performance and that correspond to different null and alternative hypotheses. The empirical application provides insights into the time variation in the performance of a representative Euro‐area Dynamic Stochastic General Equilibrium model relative to that of VARs.

Suggested Citation

Giacomini, Raffaella and Rossi, Barbara, Model Comparisons in Unstable Environments (May 2016). International Economic Review, Vol. 57, Issue 2, pp. 369-392, 2016, Available at SSRN: https://ssrn.com/abstract=2772289 or http://dx.doi.org/10.1111/iere.12161

Raffaella Giacomini (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

University of California, Los Angeles - Department of Economics ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095-1361
United States

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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