Jump to ContentJump to Main Navigation
Empirical Model Discovery and Theory EvaluationAutomatic Selection Methods in Econometrics$
Users without a subscription are not able to see the full content.

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

Show Summary Details
Page of

PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 03 July 2022

The Theory of Reduction

The Theory of Reduction

Chapter:
(p.85) 6 The Theory of Reduction
Source:
Empirical Model Discovery and Theory Evaluation
Author(s):

David F. Hendry

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262028356.003.0006

A well-defined sequence of reduction operations leads from thedata-generating process (DGP) of the economy under analysisto the local DGP (LDGP), which is the generating process inthe space of the variables under analysis. The resulting LDGPmay be complex, non-linear and non-constant from aggregation,marginalization, and sequential factorization, depending on thechoice of the set of variables under analysis. A good choice—one where there are no, or only small, losses of information fromthe reductions—is crucial if the DGP is to be viably captured byany empirical modeling exercise. In practice, the LDGP is alsoapproximated by a further series of reductions, designed so thereare again no (or small) losses of information, but nowif the LDGPdoes not satisfy those reductions, evidence of departures can beascertained by appropriate tests, so they need not be undertaken.The resulting (operational) LDGP is then nested within a generalunrestricted model (GUM), which becomes the initial specificationfor the ensuing selection search.

Keywords:   Theory of reduction, Marginalizing, sequential factorization, conditioning, local data generation process

MIT Press Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.