Experiments, Passive Observation and Scenario Analysis: Trygve Haavelmo and the Cointegrated Vector Autoregression
Kevin D. Hoover
Duke University - Departments of Economics and Philosophy
University of Copenhagen - Department of Economics
November 5, 2012
Univ. of Copenhagen Dept. of Economics Discussion Paper No. 12-16
The paper provides a careful, analytical account of Trygve Haavelmo's unsystematic, but important, use of the analogy between controlled experiments common in the natural sciences and econometric techniques. The experimental analogy forms the linchpin of the methodology for passive observation that he develops in his famous monograph, The Probability Approach in Econometrics (1944). We show how, once the details of the analogy are systematically understood, the experimental analogy can be used to shed light on theory-consistent cointegrated vector autoregression (CVAR) scenario analysis. CVAR scenario analysis can be seen as a clear example of Haavelmo's 'experimental' approach; and, in turn, it can be shown to extend and develop Haavelmo's methodology and to address issues that Haavelmo regarded as unresolved.
Number of Pages in PDF File: 31
Keywords: Trygve Haavelmo, experiments, passive observation, CVAR, scenario analysis, probability approach, econometrics
JEL Classification: C30, C31, B41, B31, C50working papers series
Date posted: November 7, 2012
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