IDEAS home Printed from
   My bibliography  Save this paper

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.

Suggested Citation

  • David Hendry, 2011. "Empirical Economic Model Discovery and Theory Evaluation," Economics Series Working Papers 529, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:529

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. 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.
    2. Castle, Jennifer L. & Doornik, Jurgen A. & Hendry, David F., 2012. "Model selection when there are multiple breaks," Journal of Econometrics, Elsevier, vol. 169(2), pages 239-246.
    3. 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.
    4. David F. Hendry & Carlos Santos, 2005. "Regression Models with Data-based Indicator Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(5), pages 571-595, October.
    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. Castle, Jennifer L. & Hendry, David F., 2010. "A low-dimension portmanteau test for non-linearity," Journal of Econometrics, Elsevier, vol. 158(2), pages 231-245, October.
    7. Spanos,Aris, 1986. "Statistical Foundations of Econometric Modelling," Cambridge Books, Cambridge University Press, number 9780521269124, March.
    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. 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.
    10. 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.
    11. 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.
    12. Hendry, David F., 1976. "The structure of simultaneous equations estimators," Journal of Econometrics, Elsevier, vol. 4(1), pages 51-88, February.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Modelling without theory
      by Economic Logician in Economic Logic on 2011-03-23 18:59:00
    2. Economic Logician Displaying Precisely No Logic
      by James Reade in Christianity and Econometrics on 2011-03-25 01:58:00


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Marçal, Emerson Fernandes & Cunha, Ronan & Merlin, Giovanni Tondin & Simões, Oscar Rodrigues, 2017. "The aftermath of 2008 turmoil on Brazilian economy: Tsunami or “Marolinha”?," Textos para discussão 459, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    2. Qin, Duo & Xu, Zhong & Zhang, Xuechun, 2014. "How much informal credit lending responded to monetary policy in China? The case of Wenzhou," Journal of Asian Economics, Elsevier, vol. 31, pages 22-31.
    3. Hendry, David F. & Johansen, Søren, 2015. "Model Discovery And Trygve Haavelmo’S Legacy," Econometric Theory, Cambridge University Press, vol. 31(01), pages 93-114, February.
    4. Marçal, Emerson Fernandes & Zimmermann, Beatrice Aline & Mendonça, Diogo de Prince & Giovanni, Merlin & Simões, Oscar Rodrigues, 2016. "Assessing global economic activity linkages: an empirical exercise based on global autoregressive regression," Textos para discussão 416, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).

    More about this item


    Empirical discovery; theory evaluation; model selection; Autometrics;

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:


    This item is featured on the following reading lists or Wikipedia pages:
    1. Economic Logic blog


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:529. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Pouliquen) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.