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VAR Modelling Approach and Cowles Commission Heritage

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  • Duo Qin

    (Queen Mary, University of London)

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Abstract

This paper examines the rise of the VAR approach from a historical perspective. It shows that the VAR approach arises as a systematic solution to the issue of 'model choice' bypassed by Cowles Commission (CC) researchers, and that the approach essentially inherits and enhances the CC legacy rather than abandons or opposes it. It argues that the approach is not so atheoretical as widely believed and that it helps reform econometrics by shifting research focus from measurement of given theories to identification/verification of data-coherent theories, and hence from confirmatory analysis to a mixture of confirmatory and exploratory analysis.

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File URL: http://www.econ.qmul.ac.uk/papers/doc/wp557.pdf
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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 557.

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Date of creation: Mar 2006
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Handle: RePEc:qmw:qmwecw:wp557

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Keywords: VAR; Macroeconometrics; Methodology; Rational expectations; Structural model;

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