The problem considered here is that of using a data-driven procedure to select a good estimate from a class of linear estimates indexed by a discrete parameter. In contrast to other papers on this subject, we consider models with heteroskedastic errors. The results apply to model selection...

This paper is concerned with tests for serial correlation in time series and in the errors of regression models. In particular, the nonstandard problem of testing for white noise against ARMA(1,1) alternatives is considered. Sup Lagrange multiplier (LM) and exponential average LM tests are...

We apply a new simulation method that solves the multidimensional probability integrals that arise in maximum likelihood estimation of a broad class of limited dependent variable models. The simulation method has four key features: the simulated choice probabilities are unbiased; they are a...

Data reduction involves a physical transition from sample data to econometric estimator and test statistic. This transition induces a mapping on the probability law of the sample, whose image is the distribution of the statistic of interest. At a general level, the mapping can often be captured...

The Cowles Commission approach is reviewed and compared to the approaches of real business cycle (RBC) theorists and new Keynesian economists. It is argued that RBC models are not tested in a serious enough way and that the new Keynesian literature is not empirical enough for testing even to be...

Impulse response and forecast error variance matrix asymptotics are developed for VAR models with some roots at or near unity and some cointegration. For such models, it is shown that impulse responses that are estimated from an unrestricted VAR are inconsistent at long horizons and tend to...

This paper determines a class of finite sample optimal tests for the existence of a changepoint at an unknown time in a normal linear multiple regression model with known variance. Optimal tests for multiple changepoints are also derived. Power comparisons of several tests are provided based on...

What is the relationship between an agent's attitude towards information, and her attitude towards risk? If an agent always prefers more information, does this imply that she obeys the independence axiom? We provide a substitution property on preferences that is equivalent to the agent...

The payments system of a modern economy is a peculiar mix of technological and institutional factors. Trade takes time and involves some form of money or credit. Going to the bank or arranging credits is expensive. Baumol (1952) and Tobin (1956) address the costs of transactions. However both...

Monthly data in physical units for seven industries are used to examine the production smoothing hypothesis. The results strongly support this hypothesis. Significant effects of expected future sales on current production are found for four industries, and the estimated decision equations for...