Complete and Incomplete Econometric Models

Complete and Incomplete Econometric Models

Complete and Incomplete Econometric Models

Complete and Incomplete Econometric Models

Synopsis

Econometric models are widely used in the creation and evaluation of economic policy in the public and private sectors. But these models are useful only if they adequately account for the phenomena in question, and they can be quite misleading if they do not. In response, econometricians have developed tests and other checks for model adequacy. All of these methods, however, take as given the specification of the model to be tested. In this book, John Geweke addresses the critical earlier stage of model development, the point at which potential models are inherently incomplete.


Summarizing and extending recent advances in Bayesian econometrics, Geweke shows how simple modern simulation methods can complement the creative process of model formulation. These methods, which are accessible to economics PhD students as well as to practicing applied econometricians, streamline the processes of model development and specification checking. Complete with illustrations from a wide variety of applications, this is an important contribution to econometrics that will interest economists and PhD students alike.

Excerpt

The Econometric and Tinbergen Institutes Lectures deal with topics in econometrics that have important policy implications. The lectures cover a wide range of topics and are not confined to any one area or subdiscipline. Leading international scientists in the fields of econometrics in which applications play a major role are invited to give three-day lectures on a topic to which they have contributed significantly.

The topic of model construction is one of the most challenging subjects in the economic sciences. In the present book John Geweke starts from the well-known assumption that all models are false in the sense of not fully describing the economic process under consideration but that some models are useful for a particular decision problem. In an innovative approach Geweke treats a Bayesian analysis of how to deal with incomplete econometric models in a predictive and decision-making context.

As editors of the series we are indebted to the Tinbergen Institute for continued support for the series.

Philip Hans Franses and Herman K. van Dijk Econometric and Tinbergen Institutes Erasmus School of Economics . . .

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