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VAR Modelling Approach and Cowles Commission Heritage

  • Duo Qin

    (Queen Mary, University of London)

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This paper examines the rise of the VAR approach from a historical perspective. It shows that the VAR approach arises as a systematic solution to the issue of 'model choice' bypassed by Cowles Commission (CC) researchers, and that the approach essentially inherits and enhances the CC legacy rather than abandons or opposes it. It argues that the approach is not so atheoretical as widely believed and that it helps reform econometrics by shifting research focus from measurement of given theories to identification/verification of data-coherent theories, and hence from confirmatory analysis to a mixture of confirmatory and exploratory analysis.

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File URL: http://www.econ.qmul.ac.uk/papers/doc/wp557.pdf
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Paper provided by Queen Mary University of London, School of Economics and Finance in its series Working Papers with number 557.

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Date of creation: Mar 2006
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Handle: RePEc:qmw:qmwecw:wp557
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  8. Rodney Maddock, 1984. "Rational Expectations Macrotheory: a Lakatosian Case Study in Program Adjustment," History of Political Economy, Duke University Press, vol. 16(2), pages 291-309, Summer.
  9. Christopher A. Sims, 1989. "Models and their uses," Discussion Paper / Institute for Empirical Macroeconomics 11, Federal Reserve Bank of Minneapolis.
  10. Summers, Lawrence H, 1991. " The Scientific Illusion in Empirical Macroeconomics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(2), pages 129-48.
  11. Ta-Chung Liu, 1955. "A Simple Forecasting Model for the U.S. Economy," IMF Staff Papers, Palgrave Macmillan, vol. 4(3), pages 434-466, August.
  12. Hansen, Lars Peter, 2004. "An Interview With Christopher A. Sims," Macroeconomic Dynamics, Cambridge University Press, vol. 8(02), pages 273-294, April.
  13. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Sargent, Thomas J, 1981. "Interpreting Economic Time Series," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 213-48, April.
  15. Sargent, Thomas J, 1976. "The Observational Equivalence of Natural and Unnatural Rate Theories of Macroeconomics," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 631-40, June.
  16. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  17. George W. Evans & Seppo Honkapohja, 2005. "An Interview with Thomas J. Sargent," University of Oregon Economics Department Working Papers 2005-2, University of Oregon Economics Department, revised 11 Jan 2005.
  18. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
  19. Clements, Michael P. & Mizon, Grayham E., 1991. "Empirical analysis of macroeconomic time series : VAR and structural models," European Economic Review, Elsevier, vol. 35(4), pages 887-917, May.
  20. Esther-Mirjam Sent, 2002. "How (Not) to Influence People: The Contrary Tale of John F. Muth," History of Political Economy, Duke University Press, vol. 34(2), pages 291-320, Summer.
  21. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September.
  22. Wallis, Kenneth F, 1980. "Econometric Implications of the Rational Expectations Hypothesis," Econometrica, Econometric Society, vol. 48(1), pages 49-73, January.
  23. Qin, Duo & Gilbert, Christopher L., 2001. "The Error Term In The History Of Time Series Econometrics," Econometric Theory, Cambridge University Press, vol. 17(02), pages 424-450, April.
  24. Leamer, Edward E, 1973. "Multicollinearity: A Bayesian Interpretation," The Review of Economics and Statistics, MIT Press, vol. 55(3), pages 371-80, August.
  25. Gilbert, Christopher L, 1989. "LSE and the British Approach to Time Series Econometrics," Oxford Economic Papers, Oxford University Press, vol. 41(1), pages 108-28, January.
  26. Finn E. Kydland & Edward C. Prescott, 1990. "The econometrics of the general equilibrium approach to business cycles," Staff Report 130, Federal Reserve Bank of Minneapolis.
  27. Sent, Esther-Mirjam, 1997. "Sargent versus Simon: Bounded Rationality Unbound," Cambridge Journal of Economics, Oxford University Press, vol. 21(3), pages 323-38, May.
  28. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  29. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
  30. Sargent, Thomas J & Wallace, Neil, 1973. "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 328-50, June.
  31. QIN, Duo, 1996. "BAYESIAN ECONOMETRICS: The First Twenty Years," Econometric Theory, Cambridge University Press, vol. 12(03), pages 500-516, August.
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