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

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  • 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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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Trygve Haavelmo; experiments; passive observation; CVAR; scenario analysis; probability approach; econometrics;
    All these keywords.

    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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