Extracting Information from the Data: A Popperian View on Empirical Macro
AbstractThe 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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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 05-05.
Length: 29 pages
Date of creation: Apr 2005
Date of revision:
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cointegrated VAR; inflation; money growth; empirical methodology;
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; Dynamic Treatment Effect Models
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-HPE-2005-04-16 (History & Philosophy of Economics)
- NEP-MAC-2005-04-16 (Macroeconomics)
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- Gunnar Bårdsen & Kjersti-Gro Lindquist & Dimitrios P. Tsomocos, 2006.
"Evaluation of macroeconomic models for financial stability analysis,"
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