Last Night a Shrinkage Saved My Life: Economic Growth, Model Uncertainty and Correlated Regressors

Publication: Scientific journalJournal articlepeer-review

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Abstract

We compare the predictive ability of Bayesian methods which deal simultaneously with model uncertainty and correlated regressors in the framework of cross-country growth regressions. In particular, we assess methods with spike and slab priors combined with different prior specifications for the slope parameters in the slab. Our results indicate that moving away from Gaussian g-priors towards Bayesian ridge, LASSO or elastic net specifications has clear advantages for prediction when dealing with datasets of (potentially highly) correlated regressors, a pervasive characteristic of the data used hitherto in the econometric literature.
Original languageEnglish
Pages (from-to)133 - 144
JournalJournal of Forecasting
Volume34
Issue number2
DOIs
Publication statusPublished - 2015

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 102022 Software development
  • 101029 Mathematical statistics
  • 101018 Statistics

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