Chapter

Re-Modeling Uk Real Consumers' Expenditure

David F. Hendry

in Empirical Model Discovery and Theory Evaluation

Published by The MIT Press

Published in print August 2014 | ISBN: 9780262028356
Published online January 2015 | e-ISBN: 9780262324410 | DOI: http://dx.doi.org/10.7551/mitpress/9780262028356.003.0016
Re-Modeling Uk Real Consumers' Expenditure

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Many features of viable empirical models cannot be derived from economic theory, institutional knowledge, or past findings alone, and need to be based on current empirical evidence. Important aspects that have to be data-based include the complete set of explanatory variables, all their functional forms and the lag reactions to these, as well as any structural breaks. Specification of the general model is mainly up to the investigator, but can be supplemented by mis-specification information, as well as by commencing from a more general embedding model and selecting automatically. We consider the specific application of modeling aggregate real consumers’ expenditure in the UK, using Autometrics applied to the data in Davidson et al. (1978), and discuss the considerations involved.

Keywords: Consumers’ expenditure; DHSY; empirical illustration

Chapter.  2400 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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