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Extracting Information from the Data: A Popperian View on Empirical Macro

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Author Info
Katarina Juselius (Institute of Economics, University of Copenhagen)
Søren Johansen (Department of Mathematical Statistics, University of Copenhagen)

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Abstract

The cointegrated VAR model is proposed as an empirically coherent framework for analyzing macroeconomic phenomena within a dynamic system of pulling and pushing forces. As an illustration we show how an economic theory for inflation and money demand gives rise to a number of hypotheses formulated as testable parameter restrictions on cointegrating relations and common trends. The procedure not only allows us to test prior theoretical hypotheses in a valid maximum likelihood framework but also provides additional empirical results suggesting how to modify or improve our theoretical understanding. The latter is important when theoretical implications fail to hold in the data.

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Publisher Info
Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 05-05.

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Length: 29 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:kud:kuiedp:0505

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Related research
Keywords: cointegrated VAR; inflation; money growth; empirical methodology;

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Find related papers by JEL classification:
B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244. [Downloadable!] (restricted)
  2. Juselius, Katarina, 1999. "Models and Relations in Economics and Econometrics," Journal of Economic Methodology, Taylor and Francis Journals, vol. 6(2), pages 259-90, July.
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  3. Søren Johansen and Anders Rygh Swensen, 1994. "Testing Rational Expectations in Vector Autoregressive Models," Discussion Papers 129, Research Department of Statistics Norway.
  4. Pagan, Adrian, 1987. " Three Econometric Methodologies: A Critical Appraisal," Journal of Economic Surveys, Blackwell Publishing, vol. 1(1), pages 3-24.
  5. King, Robert G. & Plosser, Charles I. & Stock, James H. & Watson, Mark W., 1991. "Stochastic Trends and Economic Fluctuations," American Economic Review, American Economic Association, vol. 81(4), pages 819-40, September. [Downloadable!] (restricted)
    Other versions:
  6. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  7. Katarina Juselius, 2001. "European integration and monetary transmission mechanisms: the case of Italy," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 341-358. [Downloadable!]
  8. Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000. "Cointegration analysis in the presence of structural breaks in the deterministic trend," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 216-249. [Downloadable!]
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  9. Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895.
  10. Kevin D. Hoover & Stephen J. Perez, . "Data Mining Reconsidered: Encompassing And The General-To-Specific Approach To Specification Search," Department of Economics 97-27, California Davis - Department of Economics. [Downloadable!]
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  11. Colander, David, 1993. "The Lost Art of Economics: Response," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 213-15, Summer.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gunnar Bårdsen & Kjersti-Gro Lindquist & Dimitrios P. Tsomocos, 2006. "Evaluation of macroeconomic models for financial stability analysis," Working Paper Series 6806, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
    Other versions:
  2. Bevilacqua, Franco, 2006. "Random walks and cointegration relationships in international parity conditions between Germany and USA for the Bretton-Woods period," UNU-MERIT Working Paper Series 016, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
  3. Bevilacqua, Franco, 2006. "Random walks and cointegration relationships in international parity conditions between Germany and USA for the post Bretton-Woods period," UNU-MERIT Working Paper Series 012, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
  4. Kevin D. Hoover & Katarina Juselius & Søren Johansen, 2007. "Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression," Discussion Papers 07-35, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
  5. Katarina Juselius, 2007. "The PPP Puzzle: What the Data Tell when Allowed to Speak Freely," Discussion Papers 07-33, University of Copenhagen. Department of Economics, revised Dec 2007. [Downloadable!]
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