Comments on Testing Economic Theories and the Use of Model Selection Criteria

Clive Granger, Maxwell L. King and Halbert White

No 267403, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper outlines several difficulties with testing economic theories, particularly that the theories may be vague, may relate to a decision interval different from the observation period and may need construction of a metric to convert a complicated testing situation to an easier one. We argue that it is better to use model selection procedures rather than formal hypothesis testing when asking the data to decide on model specification. This is because testing favors the null hypothesis, typically uses an arbitrary choice of significance level and researchers working with the same data could easily end up with different final models, which would make policy recommendations difficult.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 34
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/267403/files/monash-147.pdf (application/pdf)
https://ageconsearch.umn.edu/record/267403/files/monash-147.pdf?subformat=pdfa (application/pdf)

Related works:
Journal Article: Comments on testing economic theories and the use of model selection criteria (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267403

DOI: 10.22004/ag.econ.267403

Access Statistics for this paper

More papers in Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().