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A Computational Approach to Finding Causal Economic Laws

Author

Listed:
  • I-Lok Chang
  • P.A.V.B. Swamy
  • Charles Hallahan
  • George S. Tavlas

Abstract

This paper states four realities of econometric model building and shows that an econometric model can be causal only if the interpretations given to its coefficients are consistent with these realities. A numerically stable algorithm for estimating such a model subject to equality and inequality constraints on the model parameters is presented. This algorithm is designed in such a way that it can be applied even when the matrix of observations on the model‘s independent variables and the covariance matrix of the model‘s errors are deficient in rank.

Suggested Citation

  • I-Lok Chang & P.A.V.B. Swamy & Charles Hallahan & George S. Tavlas, 2000. "A Computational Approach to Finding Causal Economic Laws," Computational Economics, Springer;Society for Computational Economics, vol. 16(1/2), pages 105-136, October.
  • Handle: RePEc:kap:compec:v:16:y:2000:i:1/2:p:105-136
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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Katarína Danišková & Jarko Fidrmuc, 2011. "Inflation Convergence and the New Keynesian Phillips Curve in the Czech Republic," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 5(2), pages 099-115, August.
    2. George Hondroyiannis & P.A.V.B. Swamy & George Tavlas & Michael Ulan, 2008. "Some Further Evidence on Exchange-Rate Volatility and Exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(1), pages 151-180, April.
    3. Stephen G. Hall & George Hondroyiannis & P. A. V. B. Swamy & G. S. Tavlas, 2009. "The New Keynesian Phillips Curve and Lagged Inflation: A Case of Spurious Correlation?," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 467-481, October.
    4. P. Swamy & George Tavlas, 2007. "The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(2), pages 293-306, May.
    5. George Hondroyiannis & Sophia Lazaretou, 2007. "Inflation persistence during periods of structural change: an assessment using Greek data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(5), pages 453-475, December.
    6. P.A.V.B. Swamy & Stephen G. Hall & George S. Tavlas & I-Lok Chang & Heather D. Gibson & William H. Greene & Jatinder S. Mehta, 2016. "A Method for Measuring Treatment Effects on the Treated without Randomization," Econometrics, MDPI, Open Access Journal, vol. 4(2), pages 1-23, March.
    7. Swamy, P.A.V.B. & Tavlas, George S. & Chang, I-Lok, 2005. "How stable are monetary policy rules: estimating the time-varying coefficients in monetary policy reaction function for the US," Computational Statistics & Data Analysis, Elsevier, vol. 49(2), pages 575-590, April.
    8. Swamy, P.A.V.B. & Yaghi, Wisam & Mehta, Jatinder S. & Chang, I-Lok, 2007. "Empirical best linear unbiased prediction in misspecified and improved panel data models with an application to gasoline demand," Computational Statistics & Data Analysis, Elsevier, vol. 51(7), pages 3381-3392, April.
    9. Hondroyiannis, George & Swamy, P.A.V.B. & Tavlas, George S., 2008. "Inflation dynamics in the euro area and in new EU members: Implications for monetary policy," Economic Modelling, Elsevier, vol. 25(6), pages 1116-1127, November.
    10. Stephen Hall & P. Swamy & George Tavlas, 2012. "Generalized cointegration: a new concept with an application to health expenditure and health outcomes," Empirical Economics, Springer, vol. 42(2), pages 603-618, April.
    11. Sophocles N. Brissimis & George Hondroyiannis & P. A. V. B. Swamy & George S. Tavlas, 2003. "Empirical Modelling of Money Demand in Periods of Structural Change: The Case of Greece," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 605-628, December.
    12. Hondroyiannis, George & Swamy, P. A. V. B. & Tavlas, George S., 2001. "Modelling the long-run demand for money in the United Kingdom: a random coefficient analysis," Economic Modelling, Elsevier, vol. 18(3), pages 475-501, August.
    13. Stephen Hall & George Hondroyiannis & P. Swamy & George Tavlas, 2010. "The Fisher Effect Puzzle: A Case of Non-Linear Relationship?," Open Economies Review, Springer, vol. 21(1), pages 91-103, February.
    14. P. Swamy & I-Lok Chang & Jatinder Mehta & George Tavlas, 2003. "Correcting for Omitted-Variable and Measurement-Error Bias in Autoregressive Model Estimation with Panel Data," Computational Economics, Springer;Society for Computational Economics, vol. 22(2), pages 225-253, October.
    15. Hall, Stephen G. & Hondroyiannis, George & Swamy, P.A.V.B. & Tavlas, George S., 2009. "Assessing the causal relationship between euro-area money and prices in a time-varying environment," Economic Modelling, Elsevier, vol. 26(4), pages 760-766, July.
    16. Hall, Stephen G. & Kenjegaliev, Amangeldi & Swamy, P.A.V.B. & Tavlas, George S., 2013. "Measuring currency pressures: The cases of the Japanese yen, the Chinese yuan, and the UK pound," Journal of the Japanese and International Economies, Elsevier, vol. 29(C), pages 1-20.
    17. Katarína Danišková & Jarko Fidrmuc, 2012. "Meta-Analysis of the New Keynesian Phillips Curve," Working Papers 314, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    18. repec:gam:jecnmx:v:4:y:2016:i:2:p:19:d:66559 is not listed on IDEAS
    19. Hondroyiannis, George & Swamy, P. A. V. B. & Tavlas, George S., 2000. "Is the Japanese economy in a liquidity trap?," Economics Letters, Elsevier, vol. 66(1), pages 17-23, January.

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