Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195437 
Year of Publication: 
2017
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Volume:] 5 [Issue:] 4 [Publisher:] MDPI [Place:] Basel [Year:] 2017 [Pages:] 1-16
Publisher: 
MDPI, Basel
Abstract: 
The Fourier Flexible form provides a global approximation to an unknown data generating process. In terms of limiting function specification error, this form is preferable to functional forms based on second-order Taylor series expansions. The Fourier Flexible form is a truncated Fourier series expansion appended to a second-order expansion in logarithms. By replacing the logarithmic expansion with a Box-Cox transformation, we show that the Fourier Flexible form can reduce approximation error by 25% on average in the tails of the data distribution. The new functional form allows for nested testing of a larger set of commonly implemented functional forms.
Subjects: 
Fourier series
Box-Cox
functional form selection
specification bias
JEL: 
C51
D24
Q12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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