Haavelmo's Probability Approach and the Cointegrated VAR

34 Pages Posted: 22 Mar 2012

See all articles by Katarina Juselius

Katarina Juselius

University of Copenhagen - Department of Economics

Date Written: March 22, 2012

Abstract

Some key econometric concepts and problems addressed by Trygve Haavelmo and Ragnar Frisch are discussed within the general framework of a cointegrated VAR. The focus is on problems typical of time series data such as multicollinearity, spurious correlation and regression results, time dependent residuals, normalization, reduced rank, model selection, missing variables, simultaneity, autonomy and identification. Specifically the paper discusses the conditions under which the VAR model represents a full probability formulation of a sample of time-series observations, the plausibility of the multivariate normality assumption underlying the VAR, cointegration as a solution to the problem of spurious correlation and multicollinearity when data contain deterministic and stochastic trends, the existence of a universe, the association between Frisch's confluence analysis and cointegrated VAR analysis, simultaneity and identification when data are nonstationary, conditions under which identified cointegration relations can be considered structural or autonomous, and finally a formulation of a design of experiment for passive observations based on theory consistent CVAR scenarios illustrated with a monetary model for inflation.

Keywords: Haavelmo, CVAR, autonomy, identification, passive observations

JEL Classification: B16, B31, B41, C32, C82

Suggested Citation

Juselius, Katarina, Haavelmo's Probability Approach and the Cointegrated VAR (March 22, 2012). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 12-01, Available at SSRN: https://ssrn.com/abstract=2027417

Katarina Juselius (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
75
Abstract Views
1,265
Rank
571,914
PlumX Metrics