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The first stage in Hendry’s reduction theory revisited

Genaro Sucarrat

No 2006082, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: The reduction theory of David F. Hendry provides a comprehensive probabilistic framework for the analysis and classification of the reductions associated with empirical econometric models. However, it is unable to provide an analysis on the sameunderlying probability space of the first reduction - and hence the subsequent reductions - given a commonplace theory of social reality, namely the joint hypotheses that the course of history is indeterministic, that history does not repeat itself, and that the future depends on the past. As a solution this essay proposes that the elements of the underlying outcome space in Hendry's theory are interpreted as indeterministic worlds made up of historically inherited particulars.

Keywords: theory of reduction; DGP; possible worlds; measurement error; probabilistic causality (search for similar items in EconPapers)
JEL-codes: B40 C50 (search for similar items in EconPapers)
Date: 2006-09
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