Testing for model selection in predicting aggregate variables ∗

This paper focuses on the choice between aggregate and disaggregate models, consisting in both univariate and multivariate specifications, in predicting aggregate variables. Here, we suggest a formal hypothesis testing procedure for in-sample model selection. The empirical size and power of the test are investigated via the use of Monte Carlo simulations. Empirical results show that the test has good performance not only when the competitive models are non-nested specifications, but also when considering nested competitors.