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Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression

Author Info

Listed author(s):
  • Kevin D. Hoover

    (Duke University)

  • Katarina Juselius

    (Department of Economics, University of Copenhagen)

  • Søren Johansen

    (Department of Economics, University of Copenhagen)

Abstract

An explication of the key ideas behind the Cointegrated Vector Autoregression Approach. The CVAR approach is related to Haavelmo’s famous “Probability Approach in Econometrics” (1944). It insists on careful stochastic specification as a necessary groundwork for econometric inference and the testing of economic theories. In time-series data, the probability approach requires careful specification of the integration and cointegration properties of variables in systems of equations. The relationship between the CVAR approach and wider methodological issues and between it and related approaches (e.g., the LSE approach) are explored. The specific-to-general strategy of widening the scope of econometric models to identify stochastic trends and cointegrating relations and to nest theoretical economic models is illustrated with the example of purchasing-power parity

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File URL: http://www.econ.ku.dk/english/research/publications/wp/2007/0735.pdf/
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 07-35.

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Length: 9 pages
Date of creation: Nov 2007
Handle: RePEc:kud:kuiedp:0735
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Keywords: cointegrated VAR; stochastic trends; Purchasing Power Parity;

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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; Diffusion Processes; State Space Models
  • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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  1. Ireland, Peter N., 2004. "A method for taking models to the data," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1205-1226, March.
  2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
  3. Franchi, Massimo & Jusélius, Katarina, 2007. "Taking a DSGE Model to the Data Meaningfully," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 1, pages 1-38.
  4. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
  5. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
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