Includes bibliographical references and indexes.

Contents: Traditional methodology in retrospect: Introduction -- Principles of traditional methodology -- The Failure of traditional econometrics -- Suggestions for further reading -- Data mining: Model selection and through 'data mining' -- The R*2 and student -t statistic criteria -- Pretesting and model selection -- Data mining and the failure of traditional econometrics -- Suggestions for further reading -- Origins of a modern methodology: The DHSY consumption function: Introduction -- Economic background -- Models of absolute and permanent income -- The DHSY model -- Methodological aspects of DHSY modelling -- Testing for parameter constancy -- Stylized computer output (PC-GIVE) -- Suggestions for further reading -- General to specific modelling: Autoregressive distributed lag modelling -- Testing restrictions -- Modelling the UK consumption function -- COMFAC analysis -- General to specific modelling and data mining -- Stylized computer output (PC-GIVE) -- Suggestions for further reading -- Cointegration analysis: Introductory concepts -- Nonstationary series and integrated processes -- Testing for the order of integration -- Further considerations in the testing for the order of integration -- The concept of cointegration -- Testing for cointegration -- Modelling cointegration series through error correction models -- An example of cointegration analysis -- Stylized computer output (PC-GIVE) -- Suggestions for further reading -- Vector autoregression: Forecasting, causality and cointegration: A reconsideration of structural modelling -- Principles of vector autoregressive modelling -- Impulse response analysis -- Casualty inference -- VAR and cointegration inference -- VAR alternatives to the DHSY model -- Stylized computer output (PC-GIVE) -- Suggestions for further reading -- Exogeneity and structural invariance: Data generating processes -- Weak and strong exogeneity -- Structural invariance, superexogeneity and the lucas critique -- Exogeneity in the DHSY model -- Stylized computer output (PC-GIVE) -- Suggestions for further reading -- Non-nested models, encompassing and model selection: Problems in choosing between models -- Model selection tests -- An empirical encompassing exercise -- Stylized computer output (PC-GIVE) -- Suggestions for further reading.