Rule of parsimony and principle of parsimony (parsimony = late Latin artificial word from parcimōnia, from parcere = here

to spare, and monia = money): In relation to science in general and thus also to monetary theory, widely accepted guiding principle. According to this, only a few assumptions and variables should be used to substantiate and explain a relationship if the relevant facts can be adequately substantiated with them. The fewer hypotheses (hypotheses: suppositions or explanations which are provisionally accepted in order to interpret certain events or phenomena, and to provide guidance for further investigation) and variables (variables: magnitudes capable of assuming any of a set of values) are introduced, the easier they can be falsified (falsify; a statement, hypothesis, or theory is termed falsifiable if it is possible to conceive an observation or an argument which proves the proposition in question to be false). – However, this is a principle that expresses only one, albeit important, characteristic of the usefulness of a theory. The parsimony rule says nothing about the validity of explanatory approaches. – See data uncertainty, key data, macroeconomic, monetary policy, forward-looking, equilibrium models, dynamic-stochastic, models, monetary policy, model uncertainty, paradoxomania, structural uncertainty, systematomania, uncertainty, predictive validity, exchange rate path, inexplicable, two-pillar principle.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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