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Economists, incentives, judgment, and the European CVAR approach to macroeconometrics

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  • Colander, David C.

Abstract

This paper argues that the DSGE approach to macroeconometrics is the dominant approach because it meets the institutional needs of the replicator dynamics of the profession, not because it is necessarily the best way to do macroeconometrics. It further argues that this 'DSGE theory-first' approach is inconsistent with the historical approach that economists have advocated in the past and that the alternative European CVAR approach is much more consistent with economist's historically used methodology, correctly understood. However, because the European CVAR approach requires explicit researcher judgment, it does not do well in the replicator dynamics of the profession. The paper concludes with the suggestion that there should be an increase in dialog between the two approaches.

Suggested Citation

  • Colander, David C., 2009. "Economists, incentives, judgment, and the European CVAR approach to macroeconometrics," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-21.
  • Handle: RePEc:zbw:ifweej:7595
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2009-9
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    References listed on IDEAS

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    Cited by:

    1. David Colander, 2010. "The economics profession, the financial crisis, and method," Journal of Economic Methodology, Taylor & Francis Journals, vol. 17(4), pages 419-427.
    2. Katarina Juselius, 2009. "Time to reject the privileging of economic theory over empirical evidence? A Reply to Lawson (2009)," Discussion Papers 09-16, University of Copenhagen. Department of Economics.
    3. Spanos, Aris, 2009. "The Pre-Eminence of Theory versus the European CVAR Perspective in Macroeconometric Modeling," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-14.

    More about this item

    Keywords

    Methodology; macroeconometrics; general to specific; DSGE; VAR; judgment; incentives;

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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