Abstract
This chapter examines the rise of the VAR (Vector AutoRegressive) approach. It shows that the VAR approach arises from a fusion of the CC 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 CC researchers, hence essentially inheriting and enhancing the CC legacy rather than abandoning or opposing it. By tackling model choice, however, the VAR approach helps reform econometric research by shifting its focus from measurement of given individual structural parameters within theoretical models to identification/verification of more data-coherent theoretical models.
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