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Model averaging and its use in economics
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Steel, Mark F. J. (2020) Model averaging and its use in economics. Journal of Economic Literature, 58 (3). pp. 644-719. doi:10.1257/jel.20191385 ISSN 0022-0515.
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Official URL: https://doi.org/10.1257/jel.20191385
Abstract
The method of model averaging has become an important tool to deal with model uncertainty, for example in situations where a large amount of different theories exist, as are common in economics. Model averaging is a natural and formal response to model uncertainty in a Bayesian framework, and most of the paper deals with Bayesian model averaging. The important role of the prior assumptions in these Bayesian procedures is highlighted. In addition, frequentist model averaging methods are also discussed. Numerical methods to implement these methods are explained, and I point the reader to some freely available computational resources. The main focus is on uncertainty regarding the choice of covariates in normal linear regression models, but the paper also covers other, more challenging, settings, with particular emphasis on sampling models commonly used in economics. Applications of model averaging in economics are reviewed and discussed in a wide range of areas, among which growth economics, production modelling, finance and forecasting macroeconomic quantities.
Item Type: | Journal Article | ||||||
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Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||||
Journal or Publication Title: | Journal of Economic Literature | ||||||
Publisher: | American Economic Association | ||||||
ISSN: | 0022-0515 | ||||||
Official Date: | September 2020 | ||||||
Dates: |
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Volume: | 58 | ||||||
Number: | 3 | ||||||
Page Range: | pp. 644-719 | ||||||
DOI: | 10.1257/jel.20191385 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Reuse Statement (publisher, data, author rights): | Copyright © 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019 by the American Economic Association. Permission to make digital or hard copies of part or all of American Economic Association publications for personal or classroom use is granted without fee provided that copies are not distributed for profit or direct commercial advantage and that copies show this notice on the first page or initial screen of a display along with the full citation, including the name of the author. Copyrights for components of this work owned by others than AEA must be honored. Abstracting with credit is permitted. The author has the right to republish, post on servers, redistribute to lists and use any component of this work in other works. For others to do so requires prior specific permission and/or a fee. Permissions may be requested from the American Economic Association Administrative Office by going to the Contact Us form and choosing "Copyright/Permissions Request" from the menu. Copyright © 2019 AEA | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Copyright Holders: | Copyright © 2019 AEA | ||||||
Date of first compliant deposit: | 4 February 2019 | ||||||
Date of first compliant Open Access: | 9 April 2019 | ||||||
Related URLs: | |||||||
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