Econometric Modelling

Description

Empirical evidence in much of economics focuses on quantifying the parameters of a preconceived theory. That works well when the theory is complete, correct and immutable, but not when it is incomplete, incorrect or changing especially if unanticipated breaks perturb the assumed relationships. In practice, the available data must be used to discover what matters empirically: which variables are relevant; their dynamic reactions; the functional forms of connections; detecting multiple breaks and evolving distributions; tackling simultaneity and exogeneity; and modelling expectations. As economic data series are highly inter-correlated all those influences must be tackled jointly. However, a key feature of the approach we have developed is that theory-relevant variables can be retained without selection while selecting over other candidate variables, some of which may even be endogenous. Under the null hypothesis that the candidate variables are irrelevant, by orthogonalizing them with respect to the theory-relevant variables, the estimator distributions of the theory parameters are unaffected by selection—even when selecting from more candidate variables than observations. Under the alternative, that some of the additional candidate variables are relevant, when the initial general model nests the generating process, an improved outcome results from selection. Our modelling approach, supported by stringent model evaluation techniques, tackles all the complications of ‘real world’ economies, to provide a viable framework for empirical modelling that avoids many of the difficulties faced by ‘conventional’ approaches.

People: David Hendry, Bent Nielsen, Jennifer Castle, Jurgen Doornik, Vanessa Berenguer-Rico and James Duffy 

Project Leader / Primary Investigator

Prof. Sir David Hendry

Related Library Items

Robust approaches to forecasting
Numerical evaluation of the Gauss hypergeometric function by power summations
Introduction to Special Section on Exchange Rate Pass-through in Developing and Emerging Markets
Forecasting by factors, by variables, by both or neither?
Detecting Location Shifts During Model Selection by Step-indicator Saturation
Probability Distributions or Point Predictions? Survey Forecasts of US Output Growth and Inflation
Forecasting with Vector Autoregressive Models of Data Vintages: US Output Growth and Inflation
Statistical Model Selection with Big Data
Generalized indirect inference for discrete choice models
Co-summability: From linear to non-linear co-integration
Cumulated Sum of Squares Statistics for Non-linear and Non-stationary Regressions
Asymptotic theory for cointegration analysis when the cointegration rank is deficient
Anticipating early data revisions to US GDP and the effects of releases on equity markets
Generalised empirical likelihood-based kernel density estimation
Econometric Models of Climate Systems: The Equivalence of Two-Component Energy Balance Models and Cointegrated VARs
World CO2 Emission Intensity is Rising Faster than IPCC Scenarios Envisaged
Analysis of the Forward Search using some new results for martingales and empirical processes
Wealth, Credit Conditions and Consumption: evidence from South Africa
New methods for forecasting inflation, applied to the USA
Exchange Rate Pass-Through to Consumer Prices in South Africa: Evidence from Micro-Data
Seconding the vote of thanks on the retrospective reading of "A return to an old paper: Tests of separate families of hypotheses by D.R. Cox"
Consumption, Land Prices and the Monetary Transmission Mechanism in Japan
The limits to compensation in the financial sector
On the Accuracy and Efficiency of IMF Forecasts: A Survey and Some Extensions
Exchange rate pass-through in developing and emerging markets: a survey of conceptual, methodological and policy issues, and selected empirical findings
Forecasting and nowcasting macroeconomic variables: A methodological overview
Deciding between alternative approaches in macroeconomics
The real-wage productivity nexus
Mis-specification testing: Non-Invariance of expectations models of inflation
Introductory macro-econometrics: A new approach.
Mining big data by statistical methods
David Hendry - Celebrating a career of impact
Can economists forecast economic crashes?
How empirical evidence does or does not influence economic thinking and theory
'We've never had it so good' - how does the world today compare to 1957?
Outliers and model selection: Discussion of the paper by Søren Johansen and Bent Nielsen'
Asymptotic theory of outlier detection algorithms for linear time series regression models
Inflation forecasting models for Uganda: is mobile money relevant?
Causal transmission in reduced-form models
Forecasters' disagreement about how the economy operates, and the role of long-run relationships
Uniform inference in nonparametric predictive regression, and a unified limit theory for spatial density estimation
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Stochastic Learning Dynamics and Speed of Convergence in Population Games
A half-century diversion of monetary policy? An empirical horse-race to identify the UK variable most likely to deliver the desired nominal GDP growth rate
Using social media to identify market inefficiencies: Evidence from Twitter and Betfair
Quantifying the Uncertainty around Break Dates in Models using Indicator Saturation
Spline-DCS for forecasting trade volume in high-frequency financial data
Asymptotic theory for Beta-t-GARCH
Testing for time-varying predictive accuracy using bias-corrected indicator saturation
General-to-Specific (GETS) Modelling and Indicator Saturation with the R Package gets (version 0.7)
Book Review of Bernt P. Stigum: Econometrics in a formal science of economics: theory and the measurement of economic relations
A simple benchmark for mesothelioma projection for Great Britain
Prediction Markets, Social Media and Information Efficiency
Top incomes in East Africa before and after independence
The distribution of top incomes in former British West Africa
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Tightness of M-estimators for multiple linear regression in time series
Heteroskedasticity/Autocorrelation Consistent Standard Errors and Reliability of Inference
apc: A Package for Age-Period-Cohort Analysis (released 21 March 2016)
Clive W.J. Granger and Cointegration
Sir Clive W.J. Granger: Model Selection
Do US Macroeconomic Forecasters Exaggerate their Differences?
Improving the teaching of econometrics
All Change! The Implications of Non-stationarity for Empirical Modelling, Forecasting and Policy
Asymptotic Analysis of Iterated 1-step Huber-skip M-estimators with Varying Cut-offs
Forget about Rational Expectations
John Denis Sargan at the London School of Economics
Learning can generate long memory
Bargaining and wage rigidity in a matching model for the US
Policy analysis, forediction, and forecast failure
Are Macroeconomic Density Forecasts Informative?
Macroeconomics and Consumption

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