Econometric Modelling of Changing Time Series

David Hendry and Grayham Mizon

No 475, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We model expenditure on food in the USA, using an extended time series. Even when a theory is essentially 'correct', it can manifest serious mis-specification if just fitted to data, ignoring its observed characteristics and major external events such as wars, recessions and policy changes. When the same theory is embedded in a general framework embracing dynamics and structural breaks, it performs well even over an extended data period, as shown using Autometrics with impulse-indicator saturation. Although this particular illustration involves a simple theory, the point made is generic, and applies no matter how sophisticated the theory.

Keywords: Econometric modelling; Food expenditure; Structural breaks; Impulse-indicator saturation; Autometrics (search for similar items in EconPapers)
JEL-codes: C22 C51 (search for similar items in EconPapers)
Date: 2010-01-01
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (3)

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