Semi-automatic non-linear model selection

Working paper

We consider model selection for non-linear dynamic equations with more candidate variables than observations, based on a general class of non-linear-in-the-variables functions, addressing possible location shifts by impulse-indicator saturation. After an automatic search delivers a simplified congruent terminal model, an encompassing test can be implemented against an investigator's preferred non-linear function. When that is non-linear in the parameters, such as a threshold model, the overall approach can only be semi-automatic. The method is applied to re-analyze an empirical model of real wages in the UK over 1860-2004, updated and extended to 2005-2011 for forecast evaluation.

Authors: Castle, J; Hendry, D

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2013-05-16
• Paper number: 654
• Keywords: model selection; autometrics; impulse-indicator saturation; non-linear models; location shifts