Diagnostic checks for single-equation error-correction and autoregressive distributed lag models

Article Abstract:

Single-equation error-correction models (ECMs) are in wide use for analysis of cointegrated variables. Diagnostic tests should be used to check the specification of ECMs. Monte Carlo evidence shows that the finite-sample significance levels of the tests can be sensitive to the method used to estimate long-run coefficients that give the error-correction term of the ECM. Based on autoregressive distributed lag (ADL) models, estimates of long-run coefficients should be made. There is a good indirect approach to asymptotically valid checks.

Error analysis (Mathematics), Autoregression (Statistics)

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Regional insurance against asymmetric shocks: an empirical study for the European community

Article Abstract:

Protection against asymmetric shocks in global economies can be provided through a complex insurance scheme. This scheme, derived from a complex econometric formula based on historical data, is needed now that the exchange rate has been lost as a policy instrument due to the European monetary union and the euro currency. Simplifying the econometric formula makes the scheme less viable as a protective measure.

Models, International aspects, Euro (Currency), Economic stabilization

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Graphical methods for investigating the size and power of hypothesis tests

Article Abstract:

A graph is better than a table for illustrating the empirical distribution functions of the probability values in certain economic experiments. Graphs provide information on all points in the distribution and can be interpreted more readily. P value plots, P value discrepancy plots and size power curves can be graphed. P is the probability that a specific value will occur.

Usage, Graphic methods, Statistical hypothesis testing

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