This paper is a substantial redraft of ‘VAR modelling approach and Cowles Commission heritage’, Economics Department Discussion Paper Series QMUL no. 557, 2006.
RISE OF VAR MODELLING APPROACH*
Article first published online: 22 NOV 2010
© 2010 Blackwell Publishing Ltd
Journal of Economic Surveys
Volume 25, Issue 1, pages 156–174, February 2011
How to Cite
Qin, D. (2011), RISE OF VAR MODELLING APPROACH. Journal of Economic Surveys, 25: 156–174. doi: 10.1111/j.1467-6419.2010.00637.x
- Issue published online: 12 JAN 2011
- Article first published online: 22 NOV 2010
- History of econometrics;
- Rational expectations;
- Structural model;
Abstract This paper surveys the rise of the Vector AutoRegressive (VAR) 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.