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Empirical Economic Model Discovery and Theory Evaluation

  • David Hendry

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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File URL: http://www.economics.ox.ac.uk/materials/papers/4863/paper529.pdf
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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
Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ
Web page: http://www.economics.ox.ac.uk/
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  1. David F. Hendry & Carlos Santos, 2004. "Regression Models with Data-based Indicator Variables," Economics Papers 2004-W04, Economics Group, Nuffield College, University of Oxford.
  2. Hendry, David F., 1976. "The structure of simultaneous equations estimators," Journal of Econometrics, Elsevier, vol. 4(1), pages 51-88, February.
  3. Engle, R. & Hendry, D., 1990. "Testing Super Exogeneity And Invariance In Regression Models," Economics Series Working Papers 99100, University of Oxford, Department of Economics.
  4. 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.
  5. Castle, Jennifer L. & Fawcett, Nicholas W.P. & Hendry, David F., 2010. "Forecasting with equilibrium-correction models during structural breaks," Journal of Econometrics, Elsevier, vol. 158(1), pages 25-36, September.
  6. Bontemps, Christophe & Mizon, Grayham E., 2001. "Congruence and encompassing," Discussion Paper Series In Economics And Econometrics 0107, Economics Division, School of Social Sciences, University of Southampton.
  7. 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.
  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. repec:cup:cbooks:9780521269124 is not listed on IDEAS
  10. Carlos Santos & David Hendry & Soren Johansen, 2008. "Automatic selection of indicators in a fully saturated regression," Computational Statistics, Springer, vol. 23(2), pages 317-335, April.
  11. Jennifer Castle & David Hendry, 2010. "A Low-Dimension Portmanteau Test for Non-linearity," Economics Series Working Papers 471, University of Oxford, Department of Economics.
  12. 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.
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