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MODELLING LINEAR DYNAMIC ECONOMETRIC SYSTEMS

MODELLING LINEAR DYNAMIC ECONOMETRIC SYSTEMS David F. Hendry and Jurgen A. Doornik* I INTRODUCTION This paper is a follow up to Hendry, Neale and Srba (1988) and Hendry and Mizon (1993), extending dynamic system modelling in a number of directions. First, we formulate a linear dynamic system, noting closed, open, complete and incomplete systems for both stationary and integrated l(1) data. Next, we consider a number of new reasons for adopting general to simple modelling of the joint data density function even when the objective of the analysis is perhaps a single equation of interest. That implication is discussed in relation to the possibility of discovering economic structure using a progressive research strategy. However, enforcing a system approach necessitates a larger modelling burden than hitherto. To help offset that burden, primarily determined by the ‘infoglut’ of handling large numbers of variables, equations and parameters, we discuss PcFiml7 (see Doornik and Hendry, 1993) as a modelling tool which implements a methodical approach and focuses on graphical representations, allowing large amounts of information to be appraised in a glance. In the final section, we apply the approach to model the demand for M1 in the UK, based on Hendry and Ericsson (1991), Hendry and Mizon http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scottish Journal of Political Economy Wiley

MODELLING LINEAR DYNAMIC ECONOMETRIC SYSTEMS

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References (29)

Publisher
Wiley
Copyright
Copyright © 1994 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0036-9292
eISSN
1467-9485
DOI
10.1111/j.1467-9485.1994.tb01107.x
Publisher site
See Article on Publisher Site

Abstract

David F. Hendry and Jurgen A. Doornik* I INTRODUCTION This paper is a follow up to Hendry, Neale and Srba (1988) and Hendry and Mizon (1993), extending dynamic system modelling in a number of directions. First, we formulate a linear dynamic system, noting closed, open, complete and incomplete systems for both stationary and integrated l(1) data. Next, we consider a number of new reasons for adopting general to simple modelling of the joint data density function even when the objective of the analysis is perhaps a single equation of interest. That implication is discussed in relation to the possibility of discovering economic structure using a progressive research strategy. However, enforcing a system approach necessitates a larger modelling burden than hitherto. To help offset that burden, primarily determined by the ‘infoglut’ of handling large numbers of variables, equations and parameters, we discuss PcFiml7 (see Doornik and Hendry, 1993) as a modelling tool which implements a methodical approach and focuses on graphical representations, allowing large amounts of information to be appraised in a glance. In the final section, we apply the approach to model the demand for M1 in the UK, based on Hendry and Ericsson (1991), Hendry and Mizon

Journal

Scottish Journal of Political EconomyWiley

Published: Feb 1, 1994

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