Using Baseline Models to Improve Theories About Emerging Markets

Abstract

Purpose: This chapter reports on a rapidly growing trend in the analysis of data about emerging market economies – the use of baseline models as comparisons for explanatory models. Baseline models estimate expected values for the dependent variable in the absence of a hypothesized causal effect, but set higher standards than do traditional null hypotheses tests that expect no effect.

Design/methodology/approach: Although the use of baseline models research originated in the 1960s, it has not been widely discussed, or even acknowledged in the emerging markets (EM) literature. We surveyed published EM studies to determine trends in the use of baseline models.

Findings: We categorize and describe the different types of baseline models that scholars have used in emerging markets studies, and draw inferences about the differences between more effective and less effective uses of baseline models.

Value: We believe that comparisons with baseline models offer distinct methodological advantages for the iterative development of better explanatory models and a deeper understanding of empirical phenomena.

Keywords: hypotheses, models, analysis, emerging markets