Rise of VAR Modelling Approach

31 Pages Posted: 12 Feb 2008

See all articles by Duo Qin

Duo Qin

University of London - Department of Economics, SOAS

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Date Written: January 2008

Abstract

This paper examines the rise of the VAR (Vector AutoRegressive) approach from a historical perspective. It shows that the VAR approach arises from a fusion of the Cowles Commission tradition and time series statistical methods, catalysed by the rational expectations (RE) movement, that the approach offers a systematic solution to the issue of 'model choice' bypassed by Cowles researchers, hence essentially inheriting and enhancing the Cowles legacy rather than abandoning or opposing it. By tackling model choice, however, the VAR approach helps reform econometrics by shifting the research focus from measurement of given theories to identification/verification of data-coherent theories.

Keywords: causality, macroeconometrics, methodology, rational expectations, structural model

JEL Classification: B23, B40, C10, C30, C50

Suggested Citation

Qin, Duo, Rise of VAR Modelling Approach (January 2008). Available at SSRN: https://ssrn.com/abstract=1091132 or http://dx.doi.org/10.2139/ssrn.1091132

Duo Qin (Contact Author)

University of London - Department of Economics, SOAS ( email )

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