Chapter 18
DYNAMIC SPECIFICATION
DAVID F. HENDRY
Nufield College, Oxford
ADRIAN R. PAGAN
Australian National Uniuersity
J. DENIS SARGAN*
London School of Economics
Contents
1. Introduction
2. Data generation processes
2.1. Conditional models
2.2. Estimation, inference and diagnostic testing
2.3. Interpreting conditional models
2.4. The status of an equation
2.5. Quasi-theoretical bases for dynamic models
2.6. A typology of single dynamic equations
3. Finite distributed lags
3.1. A statement of the problem
3.2. Exact restrictions on lag weights
3.3. Choosing lag length and lag shape
3.4. Weaker restrictions on lag weights
3.5. Alternative estimators
3.6. Reformulations to facilitate model selection
4. Infinite distributed lags
4.1. Rational distributed lags
4.2. General error correction mechanisms
4.3. Derived statistics
5. Stochastic specification 1073
6. Dynamic specification in multi-equation models 1080
6.1. Identification with autoregressive errors 1080
6.2. Reduced form, final form and dynamic multipliers 1084
6.3. Unconstrained autoregressive modelling 1087
6.4. Alternative forms of disequilibrium model 1089
References 1092