31 Pages Posted: 7 Nov 2012
Date Written: November 5, 2012
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.
Keywords: Trygve Haavelmo, experiments, passive observation, CVAR, scenario analysis, probability approach, econometrics
JEL Classification: C30, C31, B41, B31, C50
Suggested Citation: Suggested Citation
Hoover, Kevin D. and Juselius, Katarina, Experiments, Passive Observation and Scenario Analysis: Trygve Haavelmo and the Cointegrated Vector Autoregression (November 5, 2012). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 12-16. Available at SSRN: https://ssrn.com/abstract=2171700 or http://dx.doi.org/10.2139/ssrn.2171700