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Representation and Stability in Testing and Measuring Rational Expectations

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Author Info
Boumans, Marcel

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Abstract

There are at least two elements of theory completion necessary for measurement: (1) a measurement formula and (2) standardization of that representation. Standardization is based on the search for stability. The more stable the correlation which the measurement formula represents is, the less influence other circumstances have. Then, the interconnection between testing, mathematical representation and standardization is of a hierarchical order. By testing a model one tries to find out to what extent the model covers the data of the phenomenon, while to be a candidate for a measurement formula the model must represent the whole data range. And among the possible representations the standard model represents the most stable correlation under different circumstances. Lucas' model of the Phillips curve has been used to investigate this interconnection between testing, representation and stability. Copyright 1999 by Taylor and Francis Group

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Journal of Economic Methodology.

Volume (Year): 6 (1999)
Issue (Month): 3 (November)
Pages: 381-401
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Handle: RePEc:taf:jecmet:v:6:y:1999:i:3:p:381-401

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  1. Roger E. Backhouse, Mary S. Morgan, 2000. "Introduction: is data mining a methodological problem?," Journal of Economic Methodology, Taylor and Francis Journals, vol. 7(2), pages 171-181, June. [Downloadable!] (restricted)
  2. Peter Rodenburg, 2005. "Models as measuring instruments: measurement of duration dependence of unemployment," Journal of Economic Methodology, Taylor and Francis Journals, vol. 12(3), pages 407-431, September. [Downloadable!] (restricted)
  3. Marcel Boumans, Mary S. Morgan, 2001. "Ceteris paribus conditions: materiality and the application of economic theories," Journal of Economic Methodology, Taylor and Francis Journals, vol. 8(1), pages 11-26, March. [Downloadable!] (restricted)
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