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Causal transmission in reduced-form models

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  • Vassili Bazinas

    (Dept of Economics Oxford University)

  • Bent Nielsen

    (Dept of Economics, Institute for Economic Modeling at the Oxford Martin School, Oxford University)

Abstract

We propose a method to explore the causal transmission of a catalyst variable through two endogenous variables of interest. The method is based on the reduced-form system formed from the conditional distribution of the two endogenous variables given the catalyst. The method combines elements from instru- mental variable analysis and Cholesky decomposition of structural vector autoregressions. We give conditions for uniqueness of the causal transmission.

Suggested Citation

  • Vassili Bazinas & Bent Nielsen, 2015. "Causal transmission in reduced-form models," Economics Papers 2015-W07, Economics Group, Nuffield College, University of Oxford.
    • Handle: RePEc:nuf:econwp:1507
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    References listed on IDEAS

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    Cited by:

    1. Søren Johansen & Bent Nielsen, 2016. "Rejoinder: Asymptotic Theory of Outlier Detection Algorithms for Linear Time Series Regression Models," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 43(2), pages 374-381, June.
    2. Marianna Bolla & Dongze Ye & Haoyu Wang & Renyuan Ma & Valentin Frappier & William Thompson & Catherine Donner & Máté Baranyi & Fatma Abdelkhalek, 2023. "Causal Vector Autoregression Enhanced with Covariance and Order Selection," Econometrics, MDPI, vol. 11(1), pages 1-30, February.
    3. Emmet Hall-Hoffarth, 2022. "Causal Discovery of Macroeconomic State-Space Models," Papers 2204.02374, arXiv.org.

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