Some comments on the role of econometrics in economic theory
The basic tension facing econometrician is that structural models are necessary for addressing monetary policy questions. But all models are, by their very nature, false. Econometric programs that focus on testing whether models are true will be ignored by practising macroeconomists. The critical task facing econometricians is to develop diagnostic tools for assessing the usefulness of model for addressing particular questions. This article review two diagnostics strategies.