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Laws and Limits of Econometrics

Listed author(s):
  • Peter C. B. Phillips

    (Cowles Foundation for Research in Economics, Yale University)

We discuss general weaknesses and limitations of the econometric approach. A template from sociology is used to formulate six laws that characterise mainstream activities of econometrics and their scientific limits. We discuss proximity theorems that quantify by explicit bounds how close we can get to the generating mechanism of the data and the optimal forecasts of next period observations using a finite number of observations. The magnitude of the bound depends on the characteristics of the model and trajectory of the data. We look at one possible future of econometrics using advanced econometric methods interactively with a web browser. Copyright Royal Economic Society 2003

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Article provided by Royal Economic Society in its journal Economic Journal.

Volume (Year): 113 (2003)
Issue (Month): 486 (March)
Pages: 26-52

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Handle: RePEc:ecj:econjl:v:113:y:2003:i:486:p:c26-c52
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  1. Dufour, J.M., 1995. "Some Impossibility Theorems in Econometrics with Applications to Instrumental Variables, Dynamic Models and Cointegration," Cahiers de recherche 9539, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Forchini, Giovanni & Hillier, Grant, 2003. "Conditional Inference For Possibly Unidentified Structural Equations," Econometric Theory, Cambridge University Press, vol. 19(05), pages 707-743, October.
  3. Phillips, Peter C B & Xiao, Zhijie, 1998. " A Primer on Unit Root Testing," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 423-469, December.
  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
  5. repec:esx:essedp:535 is not listed on IDEAS
  6. Dean Corbae & Sam Ouliaris & Peter C. B. Phillips, 2002. "Band Spectral Regression with Trending Data," Econometrica, Econometric Society, vol. 70(3), pages 1067-1109, May.
  7. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  8. Phillips, Peter C B, 1996. "Econometric Model Determination," Econometrica, Econometric Society, vol. 64(4), pages 763-812, July.
  9. Phillips, P.C.B., 1989. "Partially Identified Econometric Models," Econometric Theory, Cambridge University Press, vol. 5(02), pages 181-240, August.
  10. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics,in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339 Elsevier.
  11. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
  12. Park, Joon Y. & Phillips, Peter C.B., 1989. "Statistical Inference in Regressions with Integrated Processes: Part 2," Econometric Theory, Cambridge University Press, vol. 5(01), pages 95-131, April.
  13. Park, Joon Y. & Phillips, Peter C.B., 1999. "Asymptotics For Nonlinear Transformations Of Integrated Time Series," Econometric Theory, Cambridge University Press, vol. 15(03), pages 269-298, June.
  14. Peter C.B. Phillips, 1992. "Bayes Methods for Trending Multiple Time Series with an Empirical Application to the US Economy," Cowles Foundation Discussion Papers 1025, Cowles Foundation for Research in Economics, Yale University.
  15. Peter C.B. Phillips, 1995. "Automated Forecasts of Asia-Pacific Economic Activity," Cowles Foundation Discussion Papers 1103, Cowles Foundation for Research in Economics, Yale University.
  16. David F. Hendry & Hans-Martin Krolzig, 1999. "Improving on 'Data mining reconsidered' by K.D. Hoover and S.J. Perez," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 202-219.
  17. Phillips, Peter C.B. & Moon, Hyungsik Roger & Xiao, Zhijie, 2001. "How To Estimate Autoregressive Roots Near Unity," Econometric Theory, Cambridge University Press, vol. 17(01), pages 29-69, February.
  18. Jushan Bai & Serena Ng, 2004. "A PANIC Attack on Unit Roots and Cointegration," Econometrica, Econometric Society, vol. 72(4), pages 1127-1177, 07.
  19. Phillips, Peter C. B., 2002. "New unit root asymptotics in the presence of deterministic trends," Journal of Econometrics, Elsevier, vol. 111(2), pages 323-353, December.
  20. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
  21. Hoover,Kevin D., 2001. "The Methodology of Empirical Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521802727.
  22. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October.
  23. Park, Joon Y. & Phillips, Peter C.B., 1988. "Statistical Inference in Regressions with Integrated Processes: Part 1," Econometric Theory, Cambridge University Press, vol. 4(03), pages 468-497, December.
  24. Lahiri, Kajal, 1999. "Et Interview: Professor G.S. Maddala," Econometric Theory, Cambridge University Press, vol. 15(05), pages 753-776, October.
  25. Shimotsu, Katsumi & Phillips, Peter C B, 2002. "Exact Local Whittle Estimation of Fractional Integration," Economics Discussion Papers 8838, University of Essex, Department of Economics.
  26. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
  27. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
  28. Joshua D. Angrist & Alan B. Keueger, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 979-1014.
  29. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
  30. Werner Ploberger & Peter C. B. Phillips, 2003. "Empirical Limits for Time Series Econometric Models," Econometrica, Econometric Society, vol. 71(2), pages 627-673, March.
  31. Phillips, Peter & Sul, Donggyu, 2002. "Dynamic Panel Estimation and Homogenity Testing Under Cross Section Dependence," Working Papers 194, Department of Economics, The University of Auckland.
  32. Michael P. Clements & David F.Hendry, 2001. "Forecasting with difference-stationary and trend-stationary models," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 1-19.
  33. Peter C. B. Phillips, 1998. "New Tools for Understanding Spurious Regressions," Econometrica, Econometric Society, vol. 66(6), pages 1299-1326, November.
  34. repec:cup:etheor:v:10:y:1994:i:3-4:p:764-73 is not listed on IDEAS
  35. Peter C.B. Phillips, 1998. "Econometric Analysis of Fisher's Equation," Cowles Foundation Discussion Papers 1180, Cowles Foundation for Research in Economics, Yale University.
  36. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
  37. Chao, John C. & Phillips, Peter C. B., 1999. "Model selection in partially nonstationary vector autoregressive processes with reduced rank structure," Journal of Econometrics, Elsevier, vol. 91(2), pages 227-271, August.
  38. Phillips, Peter C. B., 1995. "Bayesian model selection and prediction with empirical applications," Journal of Econometrics, Elsevier, vol. 69(1), pages 289-331, September.
  39. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
  40. Durlauf, Steven N & Phillips, Peter C B, 1988. "Trends versus Random Walks in Time Series Analysis," Econometrica, Econometric Society, vol. 56(6), pages 1333-1354, November.
  41. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
  42. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  43. P. Dorian Owen, 2003. "General-to-Specific Modelling Using PcGets," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 609-628, 09.
  44. Xiao, Zhijie & Phillips, Peter C. B., 1998. "Higher-order approximations for frequency domain time series regression," Journal of Econometrics, Elsevier, vol. 86(2), pages 297-336, June.
  45. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  46. Park, Joon Y & Phillips, Peter C B, 2001. "Nonlinear Regressions with Integrated Time Series," Econometrica, Econometric Society, vol. 69(1), pages 117-161, January.
  47. Jeganathan, P., 1999. "On Asymptotic Inference In Cointegrated Time Series With Fractionally Integrated Errors," Econometric Theory, Cambridge University Press, vol. 15(04), pages 583-621, August.
  48. Sargan, J D, 1983. "Identification and Lack of Identification," Econometrica, Econometric Society, vol. 51(6), pages 1605-1633, November.
  49. Kim, Jae-Young, 1994. "Bayesian Asymptotic Theory in a Time Series Model with a Possible Nonstationary Process," Econometric Theory, Cambridge University Press, vol. 10(3-4), pages 764-773, August.
  50. Xiao, Zhijie & Phillips, Peter C. B., 2002. "Higher order approximations for Wald statistics in time series regressions with integrated processes," Journal of Econometrics, Elsevier, vol. 108(1), pages 157-198, May.
  51. Phillips, Peter C B & Ploberger, Werner, 1996. "An Asymptotic Theory of Bayesian Inference for Time Series," Econometrica, Econometric Society, vol. 64(2), pages 381-412, March.
  52. Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895, July.
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