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 ancient Perspective (1993, OUP) which lines the formation of econometric conception in the course of the interval 1930-1960. This booklet offers an account of the advances within the box of econometrics because the Nineteen Seventies. in response to unique study, it specializes in the reformists' circulation and faculties of concept and practices that tried a paradigm shift in econometrics within the Nineteen Seventies and Nineteen Eighties.

It describes the formation and consolidation of the Cowles fee (CC) paradigm and strains and analyses the 3 significant methodological makes an attempt to solve difficulties excited about version selection and specification of the CC paradigm. those makes an attempt have reoriented the point of interest of econometric study from inner questions (how to optimally estimate a priori given structural parameters) to exterior questions (how to settle on, layout, and specify models). It additionally examines quite a few modelling concerns and difficulties via case reviews - modelling the Phillips curve and company cycles. The 3rd a part of the ebook delves into the advance of 3 key elements of version specification intimately - structural parameters, mistakes phrases, and version choice and layout strategies. the ultimate bankruptcy makes use of quotation analyses to review the impression of the CC paradigm over the span of 3 and part a long time (1970-2005). The quotation information convey that the effect has remained huge and comparatively robust inspite of sure weakening indicators. It signifies that the reformative makes an attempt have fallen wanting inflicting a paradigm shift.

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2 25 A History of Econometrics Tiao and Zellner were among the first to try Bayesian methods for regression models. 1) and proposed a sequential Bayesian method to overcome the difficulty of specifying the prior of the regression coefficients, p (β σ ) . The idea was to split a data sample into two, and take one of the subsample estimates as the parameters of the prior, which was assumed to follow the locally uniform distribution function. The posterior coefficient estimates were then obtained by combining the specified prior with the likelihood function, l (β σ ), based on the data of the other subsample.

Applied topics on their own merits were marginalized in the core teaching, which became largely a statistics subject in economics departments. In some universities, applied topics were organized into optional courses. Separate textbooks on applied econometrics appeared around the turn of 1970, for example Cramer (1969), Wallis (1973), and Wynn and Holden (1974). Consequently, a simplified version of the CC approach came to be popularized through textbook standardization. Econometrics was taught simply 11 A History of Econometrics as a set of universal statistical tools, useful mainly for estimating the parameters of a priori formulated theories.

He likened such practice to ‘Sherlock Holmes inference’, that is ‘weaving together all the bits of evidence into a plausible story’ and ascribed the practice to the existence of too many ‘viable alternatives’ such that their explicit formulation was not feasible. To Leamer, the situation set inference with economic data apart from that with scientific data. In his words, ‘inference with economic data is more accurately described as a prejudiced search for an acceptable model than an unprejudiced selection of one from among a well-specified set of models’ (Leamer, 1974: 126) because of (i) the uncontrollable and complex nature of economic processes, (ii) economists’ wide use of non-sample information, and (iii) the inclusion in models of only a small fraction of the large set of economic variables.

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