Comments on testing economic theories and the use of model selection criteria

Clive W.J. Granger, Maxwell L. King, Halbert White

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79 Citations (Scopus)

Abstract

This paper outlines difficulties with testing economic theories, particularly that the theories may be vague, may relate to a decision interval different from the observation period, and may need a metric to convert a complicated testing situation to an easier one. We argue that it is better to use model selection procedures rather than formal hypothesis testing when deciding on model specification. This is because testing favors the null hypothesis, typically uses an arbitrary choice of significance level, and researchers using the same data can end up with different final models.

Original languageEnglish
Pages (from-to)173-187
Number of pages15
JournalJournal of Econometrics
Volume67
Issue number1
DOIs
Publication statusPublished - May 1995

Keywords

  • Hypothesis testing
  • Model choice
  • Non-nested tests
  • Selection criteria

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