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Experiments, Passive Observation and Scenario Analysis: Trygve Haavelmo and the Cointegrated Vector Autoregression

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Author Info

  • Kevin Hoover

    (Department of Economics and Department of Philosophy, Duke University)

  • Katarina Juselius

    (Department of Economics, University of Copenhagen)

Abstract

The paper provides a careful, analytical account of Trygve Haavelmo's unsystematic, but important, use of the analogy between controlled experiments common in the natural sciences and econometric techniques. The experimental analogy forms the linchpin of the methodology for passive observation that he develops in his famous monograph, The Probability Approach in Econometrics (1944). We show how, once the details of the analogy are systematically understood, the experimental analogy can be used to shed light on theory-consistent cointegrated vector autoregression (CVAR) scenario analysis. CVAR scenario analysis can be seen as a clear example of Haavelmo's 'experimental' approach; and, in turn, it can be shown to extend and develop Haavelmo's methodology and to address issues that Haavelmo regarded as unresolved.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 12-16.

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Length: 30 pages
Date of creation: 05 Nov 2012
Date of revision:
Handle: RePEc:kud:kuiedp:1216

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Related research

Keywords: Trygve Haavelmo; experiments; passive observation; CVAR; scenario analysis; probability approach; econometrics;

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  1. Giese, Julia V., 2008. "Level, Slope, Curvature: Characterising the Yield Curve in a Cointegrated VAR Model," Economics Discussion Papers 2008-13, Kiel Institute for the World Economy.
  2. Martin Eichenbaum, 1996. "Some comments on the role of econometrics in economic theory," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jan, pages 22-31.
  3. Kevin D. Hoover & Soren Johansen & Katarina Juselius, 2008. "Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression," American Economic Review, American Economic Association, vol. 98(2), pages 251-55, May.
  4. Kongsted, Hans Christian, 2005. "Testing the nominal-to-real transformation," Journal of Econometrics, Elsevier, vol. 124(2), pages 205-225, February.
  5. Pedro Garcia Duarte & Kevin D. Hoover, 2012. "Observing Shocks," History of Political Economy, Duke University Press, vol. 44(5), pages 226-249, Supplemen.
  6. Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026212274x, December.
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