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Encompassing

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Abstract

The concept of encompassing is defined and the role that it and congruence have in econometric modelling is discussed. Empirically, more than one model can appear to be congruent, but that which encompasses its rivals is dominant and will encompass all models nested within it and accurately predict the mis-specifications of non-congruent models. These results are consistent with a general-to-specific modelling strategy being successful in practice. Alternative forms and applications of encompassing tests are discussed.

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Mizon, G.E. (2018). Encompassing. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2835

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