Since the first edition of this book was published in 1993, David Hendry's work on econometric methodology has become increasingly influential. In this edition he presents a brand new paper which compellingly explains the logic of his general approach to econometric modeling and describes recent major advances in computer-automated modeling, which establish the success of the proposed strategy. Empirical studies of consumers' expenditure and money demands illustrate the methods in action. The breakthrough presented here will make econometric testing much easier.
Author(s): David F. Hendry
Edition: 2nd
Publisher: Oxford UniversityPress
Year: 2000
Language: English
Pages: 561
Contents......Page 8
Preface to the New Edition......Page 14
Preface......Page 16
Acknowledgements......Page 18
Introduction......Page 20
Part I: Roots and Route Maps......Page 28
1 Alchemyand Science......Page 30
2 Econometrics......Page 31
3 Econometrics as Alchemy......Page 33
4 Econometrics' Problems......Page 39
5 A Structure for Econometrics......Page 42
6 Is Econometrics Alchemy or Science?
......Page 46
Preamble......Page 48
1 Introduction......Page 51
2 Methodology: Autocorrelation and Simultaneity......Page 52
3 Methodology: Autocorrelation and Dynamics......Page 53
4 An Aggregate Demand Model for the United Kingdom, 1957–1967......Page 55
5 Methods which Neglect Autocorrelation......Page 57
6 Methods Which Treat Autocorrelation but Neglect Simultaneity......Page 58
8 Full Information Estimation of Vector Autocorrelation......Page 63
9 Conclusion......Page 67
Preamble......Page 71
1 Introduction......Page 73
2 Building Societies......Page 74
3 The Model of O'Herlihy and Spencer......Page 84
4 Statistical Testing of Dynamic Specification in Small Simultaneous Systems......Page 85
5 Conclusion......Page 90
Preamble......Page 91
1 Introduction......Page 93
2 Data Generation Processes......Page 96
3 Finite Distributed Lags......Page 114
4 Infinite Distributed Lags......Page 115
5 Dynamic Specification in Multi-equation Models......Page 121
Part II: The Development of Empirical Modelling Strategies......Page 132
Preamble......Page 138
2 Autocorrelation Transforms Applied to Non-stationary Data Series......Page 140
3 Differencing Economic Time Series......Page 142
4 Simultaneous Equations Systems......Page 144
6 On Business Cycle Modelling without Pretending to Have Too Much a priori Economic Theory......Page 145
Preamble......Page 148
1 Introduction......Page 151
2 COMFAC Analysis......Page 152
3 Demand for Money Study of Hacche (1974)
......Page 157
4 Conclusion and Summary......Page 163
Preamble......Page 165
1 Introduction......Page 166
2 Testing Procedures......Page 167
3 Empirical Application......Page 173
4 Monte Carlo Methods......Page 178
5 The Finite Sample Properties of the Tests......Page 184
6 Summaryand Conclusions......Page 191
Preamble......Page 194
1 Introduction......Page 198
2 The Data......Page 201
3 Three Econometric Studies and their Research Methods......Page 205
4 A Standardized Framework......Page 209
5 On Multicollinearity......Page 213
6 Selection of the ‘Best’ Equation......Page 214
7 Measurement Errors......Page 215
8 A Simple Dynamic Model......Page 216
9 Inflation Effects......Page 223
10 Summary and Conclusions......Page 227
Preamble......Page 229
1 Introduction......Page 230
2 Integral Correction Mechanisms......Page 232
3 Real Income and Inflation......Page 237
4 Empirical Evidence for the United Kingdom......Page 240
5 Summary and Conclusions
......Page 248
Preamble......Page 250
1 Introduction......Page 251
2 A Reappraisal of DHSY and HUS......Page 254
3 The Hall Model......Page 258
4 Analysis of Results......Page 261
5 ‘Forward-looking’ versus ‘Backward-looking’ Behaviour......Page 263
Preamble......Page 265
1 Introduction......Page 267
2 Predictive Failure and Model Mis-specification......Page 268
3 ‘Simple-to-general’ Modelling Methods......Page 271
4 From the General to the Specific
......Page 275
5 Feedback Mechanisms in Differenced Models......Page 279
6 Summary and Conclusions
......Page 284
7 An Empirical Illustration......Page 285
Preamble......Page 289
1 Present Controversy: a Funeral Pyre or the White Heat of Technical Advance?......Page 291
2 Construction and Destruction: Pious Hope versus Hard Reality......Page 293
3 Evaluation Criteria: Or More Than You Ever Wanted to Know about Testing Models
......Page 295
4 Empirical Illustration A: Or Assertion versus Empirical Evidence
......Page 297
5 Regime Shifts: Or Why Econometrics Textbooks Need to be Rewritten
......Page 298
6 Empirical Illustration B: UK Money Demand Re-revisited......Page 299
8 Conclusion......Page 304
Part III: Formalization......Page 306
Preamble......Page 310
2 Simultaneous Equations Estimators......Page 312
3 Systems Methods......Page 315
4 Individual Equation Methods......Page 320
5 Single-equation Methods for Autoregressive Errors......Page 325
6 Conclusion......Page 331
Preamble......Page 333
1 Econometric Background......Page 335
2 Estimator Generation......Page 339
3 Numerical Optimization......Page 340
4 Method Evaluation......Page 341
5 Structure of the Library......Page 343
6 The Monte Carlo Programs......Page 345
7 Program Validation and Development Stage......Page 346
9 Future Developments......Page 347
Preamble......Page 349
1 Introduction......Page 351
2 Definitions
......Page 353
3 Examples......Page 360
4 Application to Dynamic Simultaneous Equations Models......Page 366
5 Summary and Conclusions......Page 372
Preamble......Page 377
1 Introduction......Page 381
2 Theory Mode ls and Empirical Models......Page 382
3 An Illustration: the Repayment of Mortgage Principal......Page 384
4 An Analysis of Empirical-model Concepts......Page 387
5 The Empirical Illustration Reconsidered......Page 398
6 Dynamic Simulation......Page 401
7 Conclusion......Page 404
Preamble......Page 406
1 Introduction......Page 407
2 An Econometric Framework......Page 411
3 Estimation......Page 426
4 Testing......Page 430
5 Model Selection......Page 431
6 Conclusion......Page 433
Part IV: Retrospect and Prospect......Page 436
Preamble......Page 438
1 Introduction......Page 440
2 Design Criteria......Page 443
3 Data Coherency......Page 445
4 Valid Conditioning......Page 448
5 Parameter Constancy......Page 450
6 Data Admissibility......Page 453
7 Theory Consistency......Page 455
8 Encompassing......Page 458
9 Summary and Conclusion
......Page 460
Preamble......Page 463
1 An Overview......Page 464
2 The Model Class......Page 465
3 Model Evaluation......Page 474
4 An Information Taxonomy......Page 475
5 Test Types......Page 482
7 Model Estimation......Page 483
8 Conclusion......Page 484
1 Introduction......Page 486
2 Potential Criticisms......Page 487
3 Methodological Innovations......Page 495
4 Improving the Algorithm......Page 498
5 Selection Probabilities......Page 502
6 Deletion Probabilities......Page 503
7 Improved Inference Procedures......Page 505
8 Applying PcGets......Page 506
9 Conclusion......Page 508
References......Page 510
Bibliography......Page 537
A......Page 544
B......Page 545
C......Page 546
D......Page 547
E......Page 548
F......Page 549
G......Page 550
H......Page 551
K......Page 552
M......Page 553
N......Page 555
P......Page 556
R......Page 557
S......Page 558
T......Page 559
W......Page 560
Z......Page 561
