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

Author

Listed:
  • 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.

Suggested Citation

  • Kevin Hoover & Katarina Juselius, 2012. "Experiments, Passive Observation and Scenario Analysis: Trygve Haavelmo and the Cointegrated Vector Autoregression," Discussion Papers 12-16, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:1216
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2012/1216.pdf
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    References listed on IDEAS

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    1. 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.
    2. Haavelmo, Trygve, 2015. "Structural Models And Econometrics," Econometric Theory, Cambridge University Press, vol. 31(01), pages 85-92, February.
    3. Giese, Julia V., 2008. "Level, Slope, Curvature: Characterising the Yield Curve in a Cointegrated VAR Model," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-20.
    4. Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026212274x, May.
    5. Ragnar Frisch, 1939. "A Note on Errors in Time Series," The Quarterly Journal of Economics, Oxford University Press, vol. 53(4), pages 639-640.
    6. Heckman, James J, 1992. "Haavelmo and the Birth of Modern Econometrics: A Review of The History of Econometric Ideas," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 876-886, June.
    7. Hoover,Kevin D., 2015. "Applied Intermediate Macroeconomics," Cambridge Books, Cambridge University Press, number 9781107436824, January.
    8. 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 251-255, May.
    9. Kongsted, Hans Christian, 2005. "Testing the nominal-to-real transformation," Journal of Econometrics, Elsevier, vol. 124(2), pages 205-225, February.
    10. James J. Heckman, 2000. "Causal Parameters and Policy Analysis in Economics: A Twentieth Century Retrospective," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 45-97.
    11. Pedro Garcia Duarte & Kevin D. Hoover, 2012. "Observing Shocks," History of Political Economy, Duke University Press, vol. 44(5), pages 226-249, Supplemen.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

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

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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