Palgrave Handbook of Econometrics: Applied Econometrics

12 Methodology of Empirical Econometric Modeling (2008) emphasizes that the outcomes reported would change substantively if data ...

David F. Hendry 13 that all entities treated as parameters are constant over time, and invariant to all potentially omitted var ...

14 Methodology of Empirical Econometric Modeling We now consider each of the twelve assumptions in turn, devoting the separate s ...

David F. Hendry 15 attribute. There is simply no case that we understand no more than (say) Aristotle, or Kepler, etc.: lights w ...

16 Methodology of Empirical Econometric Modeling formulate real-business cycle theories with rational expectations, leading to ...

David F. Hendry 17 (2000, 2001) and Johansen (2006). Structural breaks matter most when they induce location shifts in the proce ...

18 Methodology of Empirical Econometric Modeling 17001750180018501900 1950 2000 2,500 5,000 7,500 10,000 12,500 Numbers of bankr ...

David F. Hendry 19 1700 17501800 1850 19001950 2000 6 7 8 9 Log bankruptcies 1700 1750 18001850 1900 19502000 5.0 7.5 10.0 Log p ...

20 Methodology of Empirical Econometric Modeling 5 6 7 8 9 10 0.5 1.0 Log bankruptcies density 1700–1791 1892–1991 1792–1891 2 4 ...

David F. Hendry 21 –1.0 –0.5 0.0 0.5 1.0 1.5 1 2 3 Change in log bankruptcies density 1700–1791 1792–1891 1892–1991 –3 –2 –1 0 1 ...

22 Methodology of Empirical Econometric Modeling 1.4.2.1 From DGP to LDGP “The prettiest are always further!” she said at last. ...

David F. Hendry 23 thenxt=N−t^1 ∑Nt i= 1 xi,t∼IN [ μt,Nt−^1 σt^2 ] . Log transforms of totals and means, x>0, only differ by ...

24 Methodology of Empirical Econometric Modeling Sequentially factorizing. Next, lettingRt^1 − 1 =(r 1 ,...,rt− 1 ), the retaine ...

David F. Hendry 25 The obvious check on the validity of such a reduction is whether longer lags matter; and as before, the key c ...

26 Methodology of Empirical Econometric Modeling and leads from (1.6) to: ∏T t= 1 fxt ( xt|Xtt−− 1 s,X^10 −s,qt,ρ 0 ) . (1.8) VA ...

David F. Hendry 27 Data partitiondetermines which variables to include and which to omit in the modelspecification, a decision ...

28 Methodology of Empirical Econometric Modeling an empirical model corresponds to its encompassing the LDGP (so not deviating s ...

David F. Hendry 29 risky and theory dependent. The risk is that a major discrepancy is not detected, leading to a poor descripti ...

30 Methodology of Empirical Econometric Modeling help mitigate problems of under-specification, it is no free lunch, as it leads ...

David F. Hendry 31 is to explicitly remove temporal dependence, as (1.4) showed, where a martin- gale difference process is crea ...