Bridging the Gap: Linking Economics and Econometrics

David Hendry

A chapter in New Trends in Macroeconomics, 2005, pp 53-77 from Springer

Abstract: Summary The marked gap that exists between macroeconomic theory models and applied econometric findings arises because most observed data variability in macro-econometrics is due to factors that are absent from economic theories, but which econometric models have to tackle (particularly various non-stationarities). Ceteris paribus may be fine for theoretical reasoning, but is unacceptable for empirical modelling. A ‘minor influence’ theorem is needed instead which can only be established empirically. Thus, the chapter considers an automatic selection approach to bring objectivity and credibility to empirical econometric modelling.

Keywords: Unit Root; Money Demand; Location Shift; Dynamic Stochastic General Equilibrium; Irrelevant Variable (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-28556-4_4

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DOI: 10.1007/3-540-28556-3_4

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