Some Recent Decelopments in Econometrics: Lessons for Applied Economists

This paper provides a non-technical discussion of some of the issues that have received attention in the econometrics literature in the last ten to fifteen years, with a special emphasis on those developments which have immediate implications for noneconometricians who undertake empirical work. Two groups of readers are especially targetted - recent graduates seeking guidance in this area; and economists whose formal training in econometrics may now be rather dated, and who wish to upgrade their empirical analysis. The discussion covers model formulation, data and computational issues, as well as developments in estimation, hypothesis testing and model-selection. The theme of the paper is that there have been important advances in all of these aspects of econometrics; that applied economists must recognise this in their work; and that as most of these developments are very easy to implement, there is no excuse for non-specialists using out-of-date techniques.