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Extracting Information from the Data: A Popperian View on Empirical Macro

Author

Listed:
  • Katarina Juselius

    (Institute of Economics, University of Copenhagen)

  • Søren Johansen

    (Department of Mathematical Statistics, University of Copenhagen)

Abstract

The cointegrated VAR model is proposed as an empirically coherent framework for analyzing macroeconomic phenomena within a dynamic system of pulling and pushing forces. As an illustration we show how an economic theory for inflation and money demand gives rise to a number of hypotheses formulated as testable parameter restrictions on cointegrating relations and common trends. The procedure not only allows us to test prior theoretical hypotheses in a valid maximum likelihood framework but also provides additional empirical results suggesting how to modify or improve our theoretical understanding. The latter is important when theoretical implications fail to hold in the data.

Suggested Citation

  • Katarina Juselius & Søren Johansen, 2005. "Extracting Information from the Data: A Popperian View on Empirical Macro," Discussion Papers 05-05, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0505
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2005/0505.pdf/
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    Citations

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    Cited by:

    1. Gunnar Bårdsen & Kjersti-Gro Lindquist & Dimitrios P. Tsomocos, 2012. "Evaluation of Macroeconomic Models for Financial Stability Analysis," Chapters, in: The Challenge of Financial Stability, chapter 3, pages 32-58, Edward Elgar Publishing.
    2. Bevilacqua, Franco, 2006. "Random walks and cointegration relationships in international parity conditions between Germany and USA for the post Bretton-Woods period," MERIT Working Papers 2006-012, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Fabio Bacchini & Cristina Brandimarte & Piero Crivelli & Roberta De Santis & Marco Fioramanti & Alessandro Girardi & Roberto Golinelli & Cecilia Jona-Lasinio & Massimo Mancini & Carmine Pappalardo & D, 2013. "Building the core of the Istat system of models for forecasting the Italian economy: MeMo-It," Rivista di statistica ufficiale, ISTAT - Italian National Institute of Statistics - (Rome, ITALY), vol. 15(1), pages 17-45.
    4. Bevilacqua, Franco, 2006. "Random walks and cointegration relationships in international parity conditions between Germany and USA for the Bretton-Woods period," MERIT Working Papers 2006-016, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    cointegrated VAR; inflation; money growth; empirical methodology;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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