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2.1. Econometric techniques: Theory versus practice

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  • Werbos, Paul J.

Abstract

This paper introduces the basic concepts used in econometric modeling, and describes five prescriptions to avoid common real-world pitfalls in that style of modeling. The paper begins by comparing econometric modeling with other forms of modeling used in energy modeling and engineering. It describes what an econometric model is, and how to build one. It then gives a detailed explanation of many facets of the five prescriptions: pay attention to uncertainty; don't expect a free lunch when devising specifications; pay attention to prior information; don't expect to draw conclusions without adequate data; and check the historical track record of your model. The issues of generalization and robustness over time receive special attention; they are important in practice, and subtle in theory. Finally, the paper discusses model development in practice, building upon experience with PURHAPS, a model I developed for the Energy Information Administration (EIA).

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  • Werbos, Paul J., 1990. "2.1. Econometric techniques: Theory versus practice," Energy, Elsevier, vol. 15(3), pages 213-236.
    • Handle: RePEc:eee:energy:v:15:y:1990:i:3:p:213-236
    DOI: 10.1016/0360-5442(90)90085-G
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    Cited by:

    1. Sreekanth, K.J., 2016. "Review on integrated strategies for energy policy planning and evaluation of GHG mitigation alternatives," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 837-850.

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