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Model selection in under-specified equations facing breaks

Abstract:

When a model under-specifies the data generation process, model selection can improve over estimating a prior specification, especially if location shifts occur. Impulse-indicator saturation (IIS) can ‘correct’ non-constant intercepts induced by location shifts in omitted variables, which leave slope parameters unaltered even when correlated with included variables. Location shifts in included variables induce changes in estimated slopes when there are correlated omitted variables. IIS helps ...

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Publication status:
Published
Peer review status:
Peer reviewed
Version:
Accepted Manuscript

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Publisher copy:
10.1016/j.jeconom.2013.08.028

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Department:
Oxford, SSD, Economics
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Department:
Oxford, SSD, Economics, EMOD
Publisher:
Elsevier Publisher's website
Journal:
Journal of Econometrics Journal website
Volume:
178
Pages:
286-293
Publication date:
2014
DOI:
ISSN:
0304-4076
Pubs id:
pubs:432207
URN:
uri:97b463b8-56da-46f5-8739-3693b1d454fa
UUID:
uuid:97b463b8-56da-46f5-8739-3693b1d454fa
Local pid:
pubs:432207
Keywords:

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