The objective of this paper is to apply the mis-specification (M-S) encompassing perspective to the problem of choosing between "linear" and "log-linear" unit-root models. A simple M-S encompassing test, based on an auxiliary regression stemming from the conditional second moment, is proposed...

Although out-of-sample forecast performance is often deemed to be the 'gold standard' of evaluation, it is not in fact a good yardstick for evaluating models in general. The arguments are illustrated with reference to a recent paper by Carruth, Hooker and Oswald ["Review of Economics and...

OLS estimation of an impulse-indicator coefficient is inconsistent, but its variance can be consistently estimated. Although the ratio of the inconsistent estimator to its standard error has a tdistribution, that test is inconsistent: one solution is to form an index of indicators. We provide...

Virtually all previous narrow money demand studies for the United Kingdom have used seasonally adjusted data for money, prices, and expenditure. This paper develops a constant, data-coherent M1 demand equation for the United Kingdom with seasonally unadjusted data. For that model, we address...

This paper critically re-evaluates some of the fundamental empirical claims about monetary behavior in the United Kingdom made by Milton Friedman and Anna J. Schwartz in their 1982 book Monetary Trends in the United States and the United Kingdom. We focus on six aspects of their analysis: the...

A structural break is viewed as a permanent change in the parameter vector of a model. Using taxonomies of all sources of forecast errors for both conditional mean and conditional variance processes, we consider the impacts of breaks and their relevance in forecasting models: (a) where the...