Chapter

Model Construction Revisited

Qin Duo

in The Formation of Econometrics

Published in print July 1997 | ISBN: 9780198292876
Published online November 2003 | e-ISBN: 9780191596803 | DOI: http://dx.doi.org/10.1093/0198292872.003.0007
 Model Construction Revisited

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Looks at problems associated with econometric model construction for the period immediately after the formative phase, and tries to link up the previous chapters and to show what has been left unsolved in the formation of econometrics. The structural modelling procedure explained only how to estimate and identify a priori given structural models, while many of the empirical studies involved searching for the appropriate structural models from the given data. This mismatch of the two sides gave rise to many problems and disputes, mostly in connection with the roles that modellers attributed to individual tools of testing, identification, and estimation in the integrated process of empirical model construction, as the procedure and the associated techniques spread and formed the core of orthodox econometrics. Revisits the issue of model construction with particular respect to the roles of testing, identification, and estimation, depicting how controversies arose as econometricians were swung back to more data‐based positions, away from the emphasis on a priori considerations; back to statistical results, away from reliance on economic theory; and back to dynamics, away from concerns over contemporaneous interdependency. The first section looks at modelling issues associated with hypothesis testing; the second examines problems about model formulation with respect to identification; the third turns to the estimation aspect of modelling; and the fourth leads the discourse to the focal issue of the probability approach underlying established econometrics by illustrating that most of the problems could be viewed as due to the incompleteness of the probability approach (as suggested in Chapter 1).

Keywords: econometric modelling; econometric models; econometrics; economic theory; estimation; history; hypothesis testing; identification; model construction; probability approach; probability theory; structural modelling; testing

Chapter.  12307 words. 

Subjects: History of Economic Thought

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