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Econometrics and Truth

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Author Info
Frain, John (Central Bank and Financial Services Authority of Ireland)

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Abstract

The second half of the sixties was, at first sight, the golden age of econometrics. At the time, it appeared that some minor advances in theory, data and computer facilities would allow us to construct an econometric model which would chart the course to universal prosperity. The seventies were to deal a cruel blow to these extravagant expectations. This rise and fall of econometrics is described in the first section of the paper. In the next two sections we look at some of the advances that have been made in the last twenty years as a response to these problems. Particular attention is paid to spurious regressions and cointegration, and to non-linear methods. A further section of the paper focuses on the use of statistical methods in the search for the truth in economics. These advances in theory would have been of no benefit without the availability of cheap but powerful computer facilities. A description of some of these systems, their limitations and some recommendations on their use are then set out. The paper closes with some comparisons of the meaning of truth in economics and the natural sciences.

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Paper provided by Central Bank & Financial Services Authority of Ireland (CBFSAI) in its series Research Technical Papers with number 2/RT/95.

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Length: 83 pages
Date of creation: May 1995
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Handle: RePEc:cbi:wpaper:2/rt/95

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244. [Downloadable!] (restricted)
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  5. Pagan, Adrian R & Wickens, M R, 1989. "A Survey of Some Recent Econometric Methods," Economic Journal, Royal Economic Society, vol. 99(398), pages 962-1025, December. [Downloadable!] (restricted)
  6. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March. [Downloadable!] (restricted)
  7. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December. [Downloadable!] (restricted)
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  8. Hylleberg, S. & Engle, R. F. & Granger, C. W. J. & Yoo, B. S., 1990. "Seasonal integration and cointegration," Journal of Econometrics, Elsevier, vol. 44(1-2), pages 215-238. [Downloadable!] (restricted)
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  9. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January. [Downloadable!] (restricted)
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  10. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
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  11. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March. [Downloadable!] (restricted)
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  12. Phillips, P C B, 1991. "Optimal Inference in Cointegrated Systems," Econometrica, Econometric Society, vol. 59(2), pages 283-306, March. [Downloadable!] (restricted)
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  13. Kydland, Finn E & Prescott, Edward C, 1991. " The Econometrics of the General Equilibrium Approach to Business Cycles," Scandinavian Journal of Economics, Blackwell Publishing, vol. 93(2), pages 161-78.
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  14. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January. [Downloadable!] (restricted)
  15. Day, Richard H. & Shafer, Wayne, 1985. "Keynesian chaos," Journal of Macroeconomics, Elsevier, vol. 7(2), pages 277-295. [Downloadable!] (restricted)
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  19. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August. [Downloadable!] (restricted)
  20. Johansen, Soren & Juselius, Katarina, 1994. "Identification of the long-run and the short-run structure an application to the ISLM model," Journal of Econometrics, Elsevier, vol. 63(1), pages 7-36, July. [Downloadable!] (restricted)
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  21. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July. [Downloadable!] (restricted)
  22. Day, Richard H. & Shafer, Wayne, 1985. "Keynesian Chaos," Journal of Macroeconomics, Elsevier, vol. 7(3), pages 277-295. [Downloadable!] (restricted)
  23. Hirotugu Akaike, 1969. "Fitting autoregressive models for prediction," Annals of the Institute of Statistical Mathematics, Springer, vol. 21(1), pages 243-247, December. [Downloadable!] (restricted)
  24. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178. [Downloadable!] (restricted)
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  25. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 383-97, August.
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  26. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  27. Juselius, Katarina, 1992. "Domestic and foreign effects on prices in an open economy: The case of Denmark," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 401-428, August. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Meyler, Aidan & Kenny, Geoff & Quinn, Terry, 1998. "Forecasting irish inflation using ARIMA models," MPRA Paper 11359, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Peter Hans Matthews, 2004. "Paradise Lost and Found? The Econometric Contributions of Clive W.J. Granger and Robert F. Engle," Middlebury College Working Paper Series 0416, Middlebury College, Department of Economics. [Downloadable!]
    Other versions:
  3. McCoy, Daniel, 1997. "How useful is Structural VAR Analysis for Irish economics?," Research Technical Papers 2/RT/97, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
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