Causal Relations via Econometrics
International Institute of Islamic Economics
April 7, 2009
International Econometric Review, Vol 2, No. 1, p 36-56, April 2010
Applied econometric work takes a superficial approach to causality. Understanding economic affairs, making good policy decisions, and progress in the economic discipline depend on our ability to infer causal relations from data. We review the dominant approaches to causality in econometrics, and suggest why they fail to give good results. We feel the problem cannot be solved by traditional tools, and requires some out-of-the-box thinking. Potentially promising approaches to solutions are discussed.
Number of Pages in PDF File: 31
Keywords: causality, regression, exogeneity, Hendry methodology, natural experiments
JEL Classification: C5, C59Accepted Paper Series
Date posted: April 7, 2009 ; Last revised: September 3, 2012
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