Discussion of the paper “Deciding between alternative approaches in macroeconomics” |
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Authors: | Gabriel Perez-Quiros |
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Institution: | Banco de España, Alcala 48 Madrid, Madrid 28014, Spain;CEPR, United Kingdom |
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Abstract: | The excellent article by David Hendry describes how to nest “theory-driven” and “data-driven” approaches when deciding between alternative models in macroeconomics. The article’s final conclusion is that theory allows the econometrician to select a set of variables, while data allows him/her to select across a wide range of alternatives: lag selection, structural breaks, functional forms, etc. The aim of this discussion is to provide the reader with an illustration of this proposed mixing of theory and data in one of the fields mentioned in the paper, macroeconomic forecasting. |
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Keywords: | Model selection Structural change Macroeconomic forecasting |
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