## Dynamic EconometricsThe main problem in econometric modelling of time series is discovering sustainable and interpretable relationships between observed economic variables. The primary aim of this book is to develop an operational econometric approach which allows constructive modelling. Professor Hendry deals with methodological issues (model discovery, data mining, and progressive research strategies); with major tools for modelling (recursive methods, encompassing, super exogeneity, invariance tests); and with practical problems (collinearity, heteroscedasticity, and measurement errors). He also includes an extensive study of US money demand. The book is self-contained, with the technical background covered in appendices. It is thus suitable for first year graduate students, and includes solved examples and exercises to facilitate its use in teaching. About the Series Advanced Texts in Econometrics is a distinguished and rapidly expanding series in which leading econometricians assess recent developments in such areas as stochastic probability, panel and time series data analysis, modeling, and cointegration. In both hardback and affordable paperback, each volume explains the nature and applicability of a topic in greater depth than possible in introductory textbooks or single journal articles. Each definitive work is formatted to be as accessible and convenient for those who are not familiar with the detailed primary literature. |

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### Contents

List of Figures xxiii | 8 |

Introduction | 8 |

Econometric Concepts | 31 |

Econometric Tools and Techniques | 75 |

Dynamics and Interdependence | 122 |

Exogeneity and Causality | 156 |

Interpreting Linear Models | 195 |

A Typology of Linear Dynamic Equations | 231 |

Modelling Issues | 544 |

Econometrics in Action | 577 |

A1 Matrix Algebra | 623 |

A2 Probability and Distributions | 639 |

A3 Statistical Theory | 677 |

Maximumlikelihood estimation | 687 |

A4 Asymptotic Distribution Theory | 707 |

A5 Numerical Optimization Methods | 751 |

Dynamic Systems | 309 |

Analysing dynamic systems | 337 |

The Theory of Reduction | 341 |

Likelihood | 371 |

Simultaneous Equations Systems | 405 |

Testing and Evaluation | 439 |

Measurement Problems in Econometrics | 442 |

Encompassing | 501 |

MacroEconometric Models | 781 |

819 | |

Common Acronyms | 847 |

853 | |

859 | |

861 | |

868 | |

### Common terms and phrases

analysis approximation assumed assumptions asymptotic autocorrelation autoregressive behaviour changes Chapter coefficient cointegrating vectors cointegration conditional expectation consider constant convergence correlation correlogram defined denoted depends derived discussed dynamic econometric econometric model economic empirical models encompassing equation estimator evaluation example F-test factorization Fitted and actual forecast formulation given hence Hendry homoscedastic hypothesis income independent inflation instrumental variables invariant joint density likelihood function limiting distribution linear log-likelihood long-run marginal matrix MCSD Monte Carlo normal distribution null obtained outcomes Oxford M.Phil parameters of interest plim probability problem random variables recursive reduction regression regressors rejection relevant residual restrictions sample ſº standard errors stationary stationary process statistics stochastic stochastic process super exogeneity theorem theory tion transformation valid values variance Wald test weakly exogenous white noise Wiener processes zero