Testing for and estimating structural breaks and other nonlinearities in a dynamic monetary sector

Neil Ericsson

Studies in Nonlinear Dynamics & Econometrics, 2016, vol. 20, issue 4, 377-398

Abstract: Milton Friedman and Anna Schwartz constructed an important macroeconomic dataset for the United Kingdom that spans 1878–1970. Numerous authors have modeled the demand for broad money on that dataset. Model selection is central to assessing the merits of the resulting empirical models, so the current paper re-evaluates that issue with computer-automated model selection. Some models are robust to the model selection path, as characterized through variations in target size, pre-search testing, fixity of regressors, impulse indicator saturation, representation of the general model, and choice of dependent variable. Model improvement is also feasible, with historically interpretable nonlinearities and structural breaks.

Keywords: Autometrics; broad money; cointegration; conditional models; dynamic specification; error correction; Friedman and Schwartz; model design; model selection; money demand; nonlinearities; structural breaks; United Kingdom (search for similar items in EconPapers)
JEL-codes: C52 E41 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/snde-2015-0104

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