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Causal Relations via Econometrics

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  • Asad Zaman

    () (International Islamic University of Islamabad)

Abstract

Applied econometric work takes a superficial approach to causality. Understanding economic affairs, making good policy decisions, and progress in the economic discipline depend on our ability to infer causal relations from data. We review the dominant approaches to causality in econometrics, and suggest why they fail to give good results. We feel the problem cannot be solved by traditional tools, and requires some out-of-the-box thinking. Potentially promising approaches to solutions are discussed.

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Bibliographic Info

Article provided by Econometric Research Association in its journal International Econometric Review.

Volume (Year): 2 (2010)
Issue (Month): 1 (April)
Pages: 36-56

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Handle: RePEc:erh:journl:v:2:y:2010:i:1:p:36-56

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Keywords: Causality; Regression; Exogeneity; Hendry Methodology; Natural Experiments;

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References

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  1. Hendry, David F., 2000. "Econometrics: Alchemy or Science?: Essays in Econometric Methodology," OUP Catalogue, Oxford University Press, number 9780198293545, September.
  2. David F. Hendry & Neil R. Ericsson, 1989. "An econometric analysis of UK money demand in MONETARY TRENDS IN THE UNITED STATES AND THE UNITED KINGDOM by Milton Friedman and Anna J. Schwartz," International Finance Discussion Papers 355, Board of Governors of the Federal Reserve System (U.S.).
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  4. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
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  6. Faust, Jon & Whiteman, Charles H., 1997. "General-to-specific procedures for fitting a data-admissible, theory-inspired, congruent, parsimonious, encompassing, weakly-exogenous, identified, structural model to the DGP: A translation and criti," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 121-161, December.
  7. Hoover,Kevin D., 2001. "Causality in Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521452175.
  8. Baba, Yoshihisa & Hendry, David F & Starr, Ross M, 1992. "The Demand for M1 in the U.S.A., 1960-1988," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 25-61, January.
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  10. Banerjee, Abhijit & Duflo, Esther, 2006. "The Economic Lives of the Poor," CEPR Discussion Papers 5968, C.E.P.R. Discussion Papers.
  11. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
  12. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
  13. Falk, Armin & Fehr, Ernst, 2003. "Why labour market experiments?," Labour Economics, Elsevier, vol. 10(4), pages 399-406, August.
  14. Hoover, Kevin D., 2004. "Lost Causes," Journal of the History of Economic Thought, Cambridge University Press, vol. 26(02), pages 149-164, June.
  15. Gary Burtless, 1995. "The Case for Randomized Field Trials in Economic and Policy Research," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 63-84, Spring.
  16. repec:fth:prinin:455 is not listed on IDEAS
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Cited by:
  1. Gnidchenko, Andrey, 2011. "Моделирование Технологических И Институциональных Эффектов В Макроэкономическом Прогнозировании
    [Technologica    ," MPRA Paper 35484, University Library of Munich, Germany, revised May 2011.
  2. Zahid Asghar, 2011. "A Structural Approach for Testing Causality," Articles of International Econometric Review (IER), Econometric Research Association, vol. 3(2), pages 1-12, September.

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