Abstract
This survey paper discusses the Cointegrated VAR methodology and how it has evolved over the last 30 years. first section is a description of major steps in the econometric development of the CVAR model that facilitated serious real world applications. next three sections are primarily methodological and discuss (i) difficulties and puzzles when confronting theory with the data, (ii) the formulation of a viable link between theory and the data, a so called theory-consistent CVAR scenario, and (iii) how all this was inspired by Trygve Haavelmo and his Nobel prize winning monograph The Probability Approach to Economics. next two sections discuss early applications of the Cointegrated VAR model to monetary transmission mechanisms, international transmission mechanisms and wage, price and unemployment dynamics. They report puzzling evidence, discuss the need for new theory, and propose a method for combining partial CVAR analyses into a larger macroeconomic model. following sections propose a new, empirically-based, approach to macroeconomics in which imperfect knowledge based expectations replace so called rational expectations and in which the financial sector plays a key role for understanding the long persistent movements in the data. last section argues that the CVAR can act as a design of experiment for passive observations and illustrates with several applications including unemployment dynamics under crises periods and aid effectiveness in South Saharan African countries.
Highlights
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I was happy to accept the invitation by the guest editors to write this survey paper based on my retirement lecture given at the Economics Department of the University of Copenhagen in 2014
The paper ends with some personal reflections on obstacles and bumps on the long journey and concludes with a discussion of what we should require from empirically relevant macroeconomics
Summary
Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel. Suggested Citation: Jusélius, Katarina (2021) : Searching for a theory that fits the data: A personal research odyssey, Econometrics, ISSN 2225-1146, MDPI, Basel, Vol 9, Iss. 1, pp. Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen. Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence
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