A History of Econometrics: The Reformation from the 1970s by Duo Qin

By Duo Qin

Reformation of Econometrics is a sequel to The Formation of Econometrics: A historic Perspective (1993, OUP) which strains the formation of econometric concept in the course of the interval 1930-1960. This e-book offers an account of the advances within the box of econometrics because the Nineteen Seventies. according to unique study, it specializes in the reformists' circulate and faculties of suggestion and practices that tried a paradigm shift in econometrics within the Nineteen Seventies and Eighties.

It describes the formation and consolidation of the Cowles fee (CC) paradigm and lines and analyses the 3 significant methodological makes an attempt to unravel difficulties all in favour of version selection and specification of the CC paradigm. those makes an attempt have reoriented the point of interest of econometric examine from inner questions (how to optimally estimate a priori given structural parameters) to exterior questions (how to decide on, layout, and specify models). It additionally examines quite a few modelling matters and difficulties via case reports - modelling the Phillips curve and company cycles. The 3rd a part of the publication delves into the advance of 3 key elements of version specification intimately - structural parameters, mistakes phrases, and version choice and layout systems. the ultimate bankruptcy makes use of quotation analyses to review the influence of the CC paradigm over the span of 3 and part a long time (1970-2005). The quotation statistics exhibit that the effect has remained huge and comparatively powerful regardless of sure weakening symptoms. It means that the reformative makes an attempt have fallen wanting inflicting a paradigm shift.

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Here, Leamer saw the information-based Akaike (1973) criterion as essentially applying a quadratic loss function to model selection. But he was not keen on the criterion, because methodologically its underlying principle of parsimony rejected the existence of any ‘true’ models and practically it lacked sufficiently specific criteria on those free coefficients, criteria he regarded as the most necessary in econometric modelling (1983b).

Simplification of presimplified models was termed as ‘post-simplification’ and the relevant statistical theories were viewed from the perspective of Bayesian loss functions. Here, Leamer saw the information-based Akaike (1973) criterion as essentially applying a quadratic loss function to model selection. But he was not keen on the criterion, because methodologically its underlying principle of parsimony rejected the existence of any ‘true’ models and practically it lacked sufficiently specific criteria on those free coefficients, criteria he regarded as the most necessary in econometric modelling (1983b).

Accepting the stance that it was the job of economists to supply theoretical models, Leamer subsequently narrowed the problems down to ‘model selection’ and set to building a ‘conceptual framework’ to assist model selection based on Bayesian statistical decision theory (Leamer 1983b). 3 Model selection based on statistical theory Leamer started his model selection research from a Bayesian theorization of ‘regression selection strategies’ (Leamer 1978b). He saw the common practice of fitting many different regression models in order to come up with a preferred model as an informal selection process and tried to formalize it by seeking to explicitly specify the priors corresponding to those selection strategies.

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