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Empirical Model Discovery and Theory EvaluationAutomatic Selection Methods in Econometrics$
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David F. Hendry and Jurgen A. Doornik

Print publication date: 2014

Print ISBN-13: 9780262028356

Published to MIT Press Scholarship Online: January 2015

DOI: 10.7551/mitpress/9780262028356.001.0001

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Re-Modeling Uk Real Consumers' Expenditure

Re-Modeling Uk Real Consumers' Expenditure

(p.195) 16 Re-modeling UK Real Consumers' Expenditure
Empirical Model Discovery and Theory Evaluation

David F. Hendry

The MIT Press

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

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