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General-to-specific procedures for fitting a data-admissible, theory- inspired, congruent, parsimonious, encompassing, weakly-exogenous, identified, structural model to the DGP: a translation and critique

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  • John Faust
  • Charles H. Whiteman

Abstract

We characterize the LSE approach by its implications for reduced-form modeling and structural interpretations. Much of what has come to be associated with the LSE methodology involves the approach to fitting reduced forms, and can be thought of as a pragmatic solution to problems created by short samples plagued by serial correlation. The policy analysis one might be able to do with an LSE model, on the other hand, hinges on structural identification arguments which do not meet the classic Cowles Commission standards, and is thus suspect.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 576.

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Date of creation: 1997
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Handle: RePEc:fip:fedgif:576
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Keywords: Macroeconomics;

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Cited by:

  1. Zaman, Asad, 2008. "Causal Relations via Econometrics," MPRA Paper 10128, University Library of Munich, Germany.
  2. Tom Engsted, 2009. "Statistical vs. Economic Significance in Economics and Econometrics: Further comments on McCloskey & Ziliak," CREATES Research Papers 2009-17, School of Economics and Management, University of Aarhus.
  3. Richard H. Cohen & Carl Bonham, 2007. "Specifying the Forecast Generating Process for Exchange Rate Survey Forecasts," Working Papers 200718, University of Hawaii at Manoa, Department of Economics.
  4. Cushman, David O., 2007. "A portfolio balance approach to the Canadian-U.S. exchange rate," Review of Financial Economics, Elsevier, vol. 16(3), pages 305-320.
  5. David Hendry & Maozu Lu & Grayham E. Mizon, 2001. "Model Identification and Non-unique Structure," Economics Papers 2002-W10, Economics Group, Nuffield College, University of Oxford.
  6. Kevin D. Hoover & Stephen J. Perez, . "Truth and Robustness in Cross-country Growth Regressions," Department of Economics 01-01, California Davis - Department of Economics.
  7. 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.).
  8. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis: Overview," IMF Working Papers 06/80, International Monetary Fund.

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