Haavelmo's Probability Approach and the Cointegrated VAR
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Haavelmo's Probability Approach and the Cointegrated VAR. / Juselius, Katarina.
Department of Economics, University of Copenhagen, 2012.Research output: Working paper › Research
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TY - UNPB
T1 - Haavelmo's Probability Approach and the Cointegrated VAR
AU - Juselius, Katarina
N1 - JEL classi…cation: B16, B31, B41, C32, C82
PY - 2012/4
Y1 - 2012/4
N2 - Some key econometric concepts and problems addressed by TrygveHaavelmo and Ragnar Frisch are discussed within the general frame-work of a cointegrated VAR. The focus is on problems typical of time-series data such as multicollinearity, spurious correlation and regres-sion results, time dependent residuals, normalization, reduced rank,model selection, missing variables, simultaneity, autonomy and iden-ti…cation. Speci…cally the paper discusses (1) the conditions underwhich the VAR model represents a full probability formulation of asample of time-series observations, (2) the plausibility of the multivari-ate normality assumption underlying the VAR, (3) cointegration as asolution to the problem of spurious correlation and multicollinearitywhen data contain deterministic and stochastic trends, (4) the exis-tence of a universe, (5) the association between Frisch’s con‡uenceanalysis and cointegrated VAR analysis, (6) simultaneity and iden-ti…cation when data are nonstationary, (7) conditions under whichidenti…ed cointegration relations can be considered structural or au-tonomous, and …nally (8) a formulation of a design of experiment forpassive observations based on theory consistent CVAR scenarios illus-trated with a monetary model for in‡ation.
AB - Some key econometric concepts and problems addressed by TrygveHaavelmo and Ragnar Frisch are discussed within the general frame-work of a cointegrated VAR. The focus is on problems typical of time-series data such as multicollinearity, spurious correlation and regres-sion results, time dependent residuals, normalization, reduced rank,model selection, missing variables, simultaneity, autonomy and iden-ti…cation. Speci…cally the paper discusses (1) the conditions underwhich the VAR model represents a full probability formulation of asample of time-series observations, (2) the plausibility of the multivari-ate normality assumption underlying the VAR, (3) cointegration as asolution to the problem of spurious correlation and multicollinearitywhen data contain deterministic and stochastic trends, (4) the exis-tence of a universe, (5) the association between Frisch’s con‡uenceanalysis and cointegrated VAR analysis, (6) simultaneity and iden-ti…cation when data are nonstationary, (7) conditions under whichidenti…ed cointegration relations can be considered structural or au-tonomous, and …nally (8) a formulation of a design of experiment forpassive observations based on theory consistent CVAR scenarios illus-trated with a monetary model for in‡ation.
KW - Faculty of Social Sciences
KW - Haavelmo
KW - CVAR
KW - autonomy
KW - identi¿cation
KW - passive observations
M3 - Working paper
BT - Haavelmo's Probability Approach and the Cointegrated VAR
PB - Department of Economics, University of Copenhagen
ER -
ID: 38080753