The LSE approach to econometrics, named for the

London School of Economics The London School of Economics and Political Science (LSE), established in 1895, is a public research university in London, England, and a member institution of the University of London. The school specialises in the social sciences. Founded ...

, involves viewing econometric models as ''reductions'' from some unknown data generation process (DGP). A complex DGP is typically modelled as the starting point and this complexity allows information in the data from the real world but absent in the theory to be drawn upon. The complexity is then reduced by the econometrician by a series of restrictions which are tested. One particular functional form, the error-correction model, is often arrived at when modelling time series. Denis Sargan and

David Forbes Hendry Sir David Forbes Hendry, FBA CStat (born 6 March 1944) is a British econometrician, currently a professor of economics and from 2001 to 2007 was head of the economics department at the University of Oxford. He is also a professorial fellow at ...

(with his general-to-specific modeling) were key figures in the development of the approach and the one way the approach has been extended is through the work on integrated and cointegrated systems by Robert F. Engle,

Clive Granger Sir Clive William John Granger (; 4 September 1934 – 27 May 2009) was a British econometrician known for his contributions to nonlinear time series analysis. He taught in Britain, at the University of Nottingham and in the United States, at t ...

, and

Søren Johansen Søren Johansen (born 6 November 1939) is a Danish statistician and econometrician who is known for his contributions to the theory of cointegration. He is currently a professor at the Department of Economics, University of Copenhagen and in the ...

. Another commonly used functional form is

distributed lag Distribution may refer to: Mathematics *Distribution (mathematics), generalized functions used to formulate solutions of partial differential equations *Probability distribution, the probability of a particular value or value range of a varia ...

or autoregressive distributed lag. David F. Hendry is considered to be the principal architect of the LSE approach. The methodology is often referred to as general-to-specific modelling, "Gets modeling" or "Hendry's methodology". The software package OxMetrics implements this process via the PcGive module ''Autometrics'' In the 1970s, when the LSE approach was in its infancy, Edward E. Leamer was an early critic of model discovery methodologies. The approach evolved to include: multiple reduction path searches, indicator saturation, COMFAC testing, and cointegrated vector autoregressive structures. Economists often associated with "Hendry's methodology" include Clive Granger, Robert F. Engle, Søren Johansen, Grayham Mizon,

Jennifer Castle Jennifer Castle is a Canadian singer-songwriter, based in Toronto, Ontario. Born in Toronto, she was raised in Mississauga and Orangeville, Ontario, Orangeville,

, Hans M. Krolzig, Neil Ericsson, and Jurgen Doornik.

References

* * * * Econometrics {{econometrics-stub