Instrument selection for estimation of a forward-looking Phillips Curve

Tiago Berriel; Marcelo C. Medeiros; Marcelo J. Sena

doi:10.1016/j.econlet.2016.05.032

Instrument selection for estimation of a forward-looking Phillips Curve

Tiago Berriel, Marcelo C. Medeiros, Marcelo J. Sena

Research output: Contribution to journal › Article › peer-review

Abstract

We show that data-driven instrument selection based on the LASSO estimator can perform well comparative to the usual ad hoc instrument set for single equation estimation of a forward-looking Phillips Curve, when the overall identification condition is strong or in cases when the instruments are not very weak. We conclude that in face of model uncertainty and/or some potentially weak instruments within a large number of candidates, data-driven selection may provide a disciplined and more reliable estimation strategy.

Original language	English (US)
Pages (from-to)	123-125
Number of pages	3
Journal	Economics Letters
Volume	145
DOIs	https://doi.org/10.1016/j.econlet.2016.05.032
State	Published - Aug 1 2016
Externally published	Yes

Keywords

Instruments
Model selection
Shrinkage

ASJC Scopus subject areas

Finance
Economics and Econometrics

Online availability

10.1016/j.econlet.2016.05.032

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AU - Medeiros, Marcelo C.

AU - Sena, Marcelo J.

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AB - We show that data-driven instrument selection based on the LASSO estimator can perform well comparative to the usual ad hoc instrument set for single equation estimation of a forward-looking Phillips Curve, when the overall identification condition is strong or in cases when the instruments are not very weak. We conclude that in face of model uncertainty and/or some potentially weak instruments within a large number of candidates, data-driven selection may provide a disciplined and more reliable estimation strategy.

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KW - Model selection

KW - Shrinkage

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JO - Economics Letters

JF - Economics Letters

ER -

Instrument selection for estimation of a forward-looking Phillips Curve

Abstract

Keywords

ASJC Scopus subject areas

Online availability

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