Chapter

On the Time‐Series Approach to Econometric Model Building

David F. Hendry

in Econometrics: Alchemy or Science?

Published in print October 2000 | ISBN: 9780198293545
Published online November 2003 | e-ISBN: 9780191596391 | DOI: http://dx.doi.org/10.1093/0198293542.003.0006
 On the Time‐Series Approach to Econometric Model Building

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The ‘time‐series’ approach to econometrics is critically evaluated, and analytical test power response surfaces presented. Non‐stationarity, differencing and ‘error‐correction’ models (though not yet named) are discussed. Residual autocorrelation is reinterpreted using Sargan's common factor approach, and embryonic ideas presented on how to explain competing models’ findings to reduce the proliferation of conflicting results. Finally, the respective roles of criticism and construction are considered.

Keywords: common factor; conflicting results; construction; criticism; differencing; non‐stationarity; residual autocorrelation; test power response surfacestime series

Chapter.  5131 words. 

Subjects: Econometrics and Mathematical Economics

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