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Empirical Economic Model Discovery and Theory Evaluation

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  • David Hendry

Abstract

Economies are so high dimensional and non-constant that many features of models cannot be derived by prior reasoning, intrinsically involving empirical discovery and requiring theory evaluation.� Despite important differences, discovery and evaluation in economics are similar to those of science.� Fitting a pre-specified equation limits discovery, but automatic methods can formulate much more general models with many variables, long lag lengths and non-linearities, allowing for outliers, data contamination, and parameter shifts; select congruent parsimonious-encompassing models even with more candidate variables than observations, while embedding the theory; then rigorously evaluate selected models to ascertain their viability.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 529.

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Date of creation: 01 Feb 2011
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Handle: RePEc:oxf:wpaper:529

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Keywords: Empirical discovery; theory evaluation; model selection; Autometrics;

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  1. Hendry, David F., 1979. "The behaviour of inconsistent instrumental variables estimators in dynamic systems with autocorrelated errors," Journal of Econometrics, Elsevier, vol. 9(3), pages 295-314, February.
  2. Jennifer Castle & David Hendry & Nicholas W.P. Fawcett, 2008. "Forecasting with Equilibrium-correction Models during Structural Breaks," Economics Series Working Papers 408, University of Oxford, Department of Economics.
  3. Engle, Robert F. & Hendry, David F., 1993. "Testing superexogeneity and invariance in regression models," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 119-139, March.
  4. David F. Hendry & Carlos Santos, 2004. "Regression Models with Data-based Indicator Variables," Economics Papers 2004-W04, Economics Group, Nuffield College, University of Oxford.
  5. Jennifer Castle & David Hendry, 2010. "A Low-Dimension Portmanteau Test for Non-linearity," Economics Series Working Papers 471, University of Oxford, Department of Economics.
  6. David Hendry & Søren Johansen & Carlos Santos, 2008. "Automatic selection of indicators in a fully saturated regression," Computational Statistics, Springer, vol. 23(2), pages 337-339, April.
  7. Hendry, David F., 1976. "The structure of simultaneous equations estimators," Journal of Econometrics, Elsevier, vol. 4(1), pages 51-88, February.
  8. Jennifer L. Castle & Nicholas W.P. Fawcett & David F. Hendry, 2009. "Nowcasting Is Not Just Contemporaneous Forecasting," National Institute Economic Review, National Institute of Economic and Social Research, vol. 210(1), pages 71-89, October.
  9. Jennifer Castle & David Hendry & Jurgen A. Doornik, 2008. "Model Selection when there are Multiple Breaks," Economics Series Working Papers 407, University of Oxford, Department of Economics.
  10. Roger Fouquet & Peter J.G. Pearson, 2006. "Seven Centuries of Energy Services: The Price and Use of Light in the United Kingdom (1300-2000)," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 139-178.
  11. Spanos,Aris, 1986. "Statistical Foundations of Econometric Modelling," Cambridge Books, Cambridge University Press, number 9780521269124, April.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Modelling without theory
    by Economic Logician in Economic Logic on 2011-03-23 13:59:00
  2. Economic Logician Displaying Precisely No Logic
    by James Reade in Christianity and Econometrics on 2011-03-24 20:58:00
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Cited by:
  1. David Hendry & Soren Johansen, 2012. "Model Discovery and Trygve Haavelmo's Legacy," Economics Series Working Papers 598, University of Oxford, Department of Economics.

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