6 Post estimation steps

  • Post estimation steps are crucial for validating estimated parameters, understanding their robustness, and ensuring that results are reliable and meaningful.

  • After estimating the model, we should determine if it is appropriate. An appropriate econometric model should meet the following criteria:

  1. estimates are meaningful (positive/negative) and statistically significant
  2. model fits the data well (according to GOF measures)
  3. all assumptions are met (requires diagnostic checking)
  4. estimates are stable (robust)
  • If model is not appropriate we should consider re-estimating the model with a new specification, incorporating new variables (or transforming existing variables), or even using an alternative estimation method (other than OLS).

The key post estimation steps are typically taken:

  1. significance testing
  2. determining the goodness-of-fit
  3. diagnostic checking
  4. stability checking in terms of robustness