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Causal transmission in reduced-form models

Listed author(s):
  • Vassili Bazinas

    (Dept of Economics Oxford University)

  • Bent Nielsen

    ()

    (Dept of Economics, Institute for Economic Modeling at the Oxford Martin School, Oxford University)

We propose a method to explore the causal transmission of a catalyst variable through two endogenous variables of interest. The method is based on the reduced-form system formed from the conditional distribution of the two endogenous variables given the catalyst. The method combines elements from instru- mental variable analysis and Cholesky decomposition of structural vector autoregressions. We give conditions for uniqueness of the causal transmission.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2015/Causality2015.pdf
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Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2015-W07.

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Length: 22 pages
Date of creation: 13 Jul 2015
Handle: RePEc:nuf:econwp:1507
Contact details of provider: Web page: https://www.nuffield.ox.ac.uk/economics/

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  1. Kilian, Lutz & Demiroglu, Ufuk, 2000. "Residual-Based Tests for Normality in Autoregressions: Asymptotic Theory and Simulation Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 40-50, January.
  2. Nanny Wermuth & Kayvan Sadeghi, 2012. "Sequences of regressions and their independences," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 21(2), pages 215-252, June.
  3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
  4. Christina D. Romer & David H. Romer, 2010. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," American Economic Review, American Economic Association, vol. 100(3), pages 763-801, June.
  5. Nanny Wermuth & Kayvan Sadeghi, 2012. "Rejoinder on: Sequences of regressions and their independences," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 21(2), pages 274-279, June.
  6. David F. Hendry & Bent Nielsen, 2007. "Preface to Econometric Modeling: A Likelihood Approach," Introductory Chapters,in: Econometric Modeling: A Likelihood Approach Princeton University Press.
  7. Bent Nielsen & Andrew Whitby, 2015. "A Joint Chow Test for Structural Instability," Econometrics, MDPI, Open Access Journal, vol. 3(1), pages 1-31, March.
  8. Imbens, Guido W., 2014. "Instrumental Variables: An Econometrician's Perspective," IZA Discussion Papers 8048, Institute for the Study of Labor (IZA).
  9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
  10. Gunnar Bårdsen & Dag Kolsrud & Ragnar Nymoen, 2012. "Forecast robustness in macroeconometric models," Working Paper Series 13712, Department of Economics, Norwegian University of Science and Technology.
  11. David Hendry & Carlos Santos, 2010. "An Automatic Test of Super Exogeneity," Economics Series Working Papers 476, University of Oxford, Department of Economics.
  12. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
  13. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
  14. David F. Hendry & Bent Nielsen, 2007. "The Bernoulli model, from Econometric Modeling: A Likelihood Approach," Introductory Chapters,in: Econometric Modeling: A Likelihood Approach Princeton University Press.
  15. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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