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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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Empirical Modeling Illustrated

Empirical Modeling Illustrated

(p.57) 4 Empirical Modeling Illustrated
Empirical Model Discovery and Theory Evaluation

David F. Hendry

The MIT Press

This chapter illustrates the discussion in Chapter 3 using Autometrics on an artificial data generation process first created almost 30 years ago for an early version of PcGive. In a setting where the DGP is known to the investigator, but obviously not to the software, what is found can be checked against what should have been found. The major points of Chapter 3 that are implemented are estimating the system of four simultaneous equations; diagnostic checking for the selection of a single equation being well-specified; parsimonious-encompassing tests of it against its GUM; testing for non-linearities; handling more candidate variables than observations when using IIS; selecting lag lengths despite the ensuing collinearity; checking for cointegrated relationships; implementing both a correct and a partially correct theory; and testing for super exogeneity.

Keywords:   Artificial data, simultaneous equations, diagnostic checking, congruence, exogeneity

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