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Reflections on Econometric Methodology

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Author Info
Peter C.B. Phillips () (Cowles Foundation, Yale University)

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Abstract

General issues about the methodology of empirical econometric research are discussed. It is argued that the most successful paradigms for applied work are the ones that have a capacity to survive and to evolve into more useful forms as these are needed. Paradigms that embrace progressive modeling principles, such as those espoused by David Hendry, seem most amenable to this criterion. It is also argued that econometric theory has a large role to play in helping us to understand the strengths and the weaknesses of a methodology and to codify what its prescriptions entail. The time series methodology of David Hendry is considered in some detail. It is shown that the Hendry methodology comes remarkable close to achieving an optimal inference procedure for long run structural relationships even though it is conducted on a single equation basis. The findings indicate that the methodology may be improved further to achieve results that are equivalent to optimal estimation.

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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 893.

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Length: 42 pages
Date of creation: Dec 1988
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Publication status: Published in The Economic Record (December 1988), 344-359
Handle: RePEc:cwl:cwldpp:893

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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
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Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Related research
Keywords: Methodology; econometrics; empirical research; structural relationships;

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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. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
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  2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  3. Truman F. Bewley, 1988. "Knightian Decision Theory and Econometric Inference," Cowles Foundation Discussion Papers 868, Cowles Foundation, Yale University. [Downloadable!]
  4. Peter C.B. Phillips & Joon Y. Park, 1986. "On the Formulation of Wald Tests of Nonlinear Restrictions," Cowles Foundation Discussion Papers 801, Cowles Foundation, Yale University. [Downloadable!]
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  5. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
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  6. Hendry, David F. & Richard, Jean-Francois, 1982. "On the formulation of empirical models in dynamic econometrics," Journal of Econometrics, Elsevier, vol. 20(1), pages 3-33, October. [Downloadable!] (restricted)
  7. Peter C.B. Phillips & Joon Y. Park, 1986. "Statistical Inference in Regressions with Integrated Processes: Part 1," Cowles Foundation Discussion Papers 811R, Cowles Foundation, Yale University, revised Aug 1987. [Downloadable!]
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  8. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October. [Downloadable!] (restricted)
  9. Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November. [Downloadable!] (restricted)
  10. Truman F. Bewley, 1986. "Knightian Decision Theory: Part 1," Cowles Foundation Discussion Papers 807, Cowles Foundation, Yale University. [Downloadable!]
  11. Phillips, P.C.B., 1983. "Exact small sample theory in the simultaneous equations model," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 8, pages 449-516 Elsevier. [Downloadable!] (restricted)
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  12. McAleer, Michael & Pagan, Adrian R & Volker, Paul A, 1985. "What Will Take the Con out of Econometrics?," American Economic Review, American Economic Association, vol. 75(3), pages 293-307, June. [Downloadable!] (restricted)
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  13. Mizon, Grayham E & Hendry, David F, 1980. "An Empirical Application and Monte Carlo Analysis of Tests of Dynamic Specification," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 21-45, January. [Downloadable!] (restricted)
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Cited by:
(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. Hoover, Kevin, 2000. "Truth and Robustness in Cross-Country Growth Regression," Working Papers 01-1, University of California at Davis, Department of Economics. [Downloadable!]
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  2. Kevin D. Hoover, Stephen J. Perez, 2000. "Three attitudes towards data mining," Journal of Economic Methodology, Taylor and Francis Journals, vol. 7(2), pages 195-210, June. [Downloadable!] (restricted)
  3. Bigsten, Arne & Durevall, Dick, 2004. "Kenya’s Development Path and Factor Prices 1964-2000," Working Papers in Economics 142, Göteborg University, Department of Economics. [Downloadable!]
  4. Peter C.B. Phillips, 1992. "Some Exact Distribution Theory for Maximum Likelihood Estimators of Cointegrating Coefficients in Error Correction Models," Cowles Foundation Discussion Papers 1039, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  5. Brainerd, Elizabeth & Siegler, Mark V, 2003. "The Economic Effects of the 1918 Influenza Epidemic," CEPR Discussion Papers 3791, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Stephan Sauer & Jan-Egbert Sturm, 2003. "Using Taylor Rules to Understand ECB Monetary Policy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  7. Aron, Janine & Elbadawi, Ibrahim, 1994. "Foreign exchange auction markets in sub-Saharan Africa : dynamic models for auction exchange rates," Policy Research Working Paper Series 1396, The World Bank. [Downloadable!]
  8. Kevin D. Hoover & Stephen J. Perez, . "Data Mining Reconsidered: Encompassing And The General-To-Specific Approach To Specification Search," Department of Economics 97-27, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  9. Ashok Parikh, 1994. "Tests of real interest parity in international currency markets," Journal of Economics, Springer, vol. 59(2), pages 167-191, June. [Downloadable!] (restricted)
  10. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  11. Caporale, Guglielmo Maria & Pittis, Nikitas, 2004. "Robustness of the CUSUM and CUSUM-of-Squares Tests to Serial Correlation, Endogeneity and Lack of Structural Invariance. Some Monte Carlo Evidence," Economics Series 157, Institute for Advanced Studies. [Downloadable!]
  12. Ekaterini Panopoulou & Nicolaos Kourogenis & Nikitas Pittis, 2006. "Irrelevant but highly persistent instruments in stationary regressions with endogenous variables containing near-to-unit roots," Economics, Finance and Accounting Department Working Paper Series n1620106, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  13. Julia Campos & Neil R. Ericsson & David F. Hendry, 2005. "General-to-specific modeling: an overview and selected bibliography," International Finance Discussion Papers 838, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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