Chapter

The Econometric Analysis of Economic Time Series

David F. Hendry and Jean‐François Richard

in Econometrics: Alchemy or Science?

Published in print October 2000 | ISBN: 9780198293545
Published online November 2003 | e-ISBN: 9780191596391 | DOI: http://dx.doi.org/10.1093/0198293542.003.0018
 The Econometric Analysis of Economic Time Series

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This overview proposes a general framework linking economic analysis to a reduction‐based statistical methodology based on parameter change, expectations and contingent plans, conditioning and weak exogeneity. Both long‐run economic theory and dynamic adjustment are discussed and general‐to‐specific modelling is linked to the theory of reduction to clarify modelling and model‐related concepts. The statistical analysis extends the estimator generating formula to `incomplete’ linear models. A sequence of six expository themes interprets time‐series econometrics: models are derived as reductions from the process which actually generated the data, inducing parameter transformations which affect their constancy, invariance and interpretation; conditioning and weak exogeneity are linked to contingent plans of economic agents; an EGE covers estimation theory for linear sub‐systems; a typology of linear dynamic equations elucidates their relative properties; the efficient score describes diagnostic testing; and encompassing inter‐related empirical models.

Keywords: conditioning; contingent plans; efficient score; encompassing; estimator generating formula; expectations; general‐to‐specific modelling; linear dynamic equations; theory of reduction; weak exogeneity

Chapter.  16703 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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