VARX Lasso

Lasso, Least Absolute Shrinkage and Selection Operator is the most successful application of AI within econometrics. Lasso was introduced in order to improve the prediction accuracy and interpretability of regression models by altering the model fitting process to select only a subset of the provided independent variables for use in the final model rather than using all of them. Lasso forces certain coefficients to be set to zero, effectively choosing a simpler model that does not include those coefficients.