The Criterion for Selection
In Chapter II the criterion of optimality has already been mentioned several times. However, it has to be determined yet. The latter will be done in this chapter in the Sections 3.2 and 3.3 respectively, in the case in which the parameters of the models are given or in which they are estimated. In the same section the criterion is applied to determine the optimal number of equations. Afterwards, in Section 3.4 a criterion of selection is introduced which has the damage caused by the forecasting errors incorporated.
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