The Optimal Prediction Simultaneous Equations Selection
Alexander Gorobets · RePEc: Research Papers in Economics · 2004
This paper presents a method for selection of the optimal simultaneous equation system from a set of nested models under the condition of a small sample. The purpose of selection is to identify a model with the best prognostic possibilities. Multivariate AIC, BIC and AICC are used as the selection criteria. The selection properties of this method are investigated by Monte−Carlo simulations. They show that the structural form of system can outperform its reduced form for making predictions. Author is grateful to Erasmus Research Institute of Management for given opportunity to conduct this research. Special gratitude is given to Tim Conley and anonymous reviewers for many helpful discussions and comments on the manuscript.