Preview

Voprosy Ekonomiki

Advanced search
Open Access Open Access  Restricted Access Subscription Access

How to Distinguish Cause and Effect? (2011 Nobel Memorial Prize in Economics)

https://doi.org/10.32609/0042-8736-2012-1-4-20

Abstract

The paper discusses the contribution of 2011 Nobel laureates, Thomas Sargent and Christopher Sims, to economics. It is shown how these two economists proposed to analyze causal relationships in macroeconomics. The common idea of the two laureates is that one should not look for isolated empirical relationships; rather, one should seek theories, which are capable of explaining the observed regularities, and then subject the whole theories to empirical tests. However, the specific methods proposed by the two economists differ. Thus, Sargent proposed to test a specific model; Sims, on the other hand, introduced the method called structural autoregression, in which an econometric model is subjected to a minimal set of theoretical restrictions encompassing a large set of theoretical models. Then the paper discusses applications of this logic to different situations.

About the Authors

O. Zamulin
National Research University Higher School of Economics
Russian Federation


K. Styrin
New Economic School
Russian Federation


References

1. Замулин О. Концепция реальных экономических циклов и ее роль в эволюции макроэкономической теории // Вопросы экономики. 2005. № 1. С. 144-153.

2. Замулин О. Уроки Фелпса - для мира и для России // Вопросы экономики. 2007. № 1. С. 55-65.

3. Anderson E. W., McGrattan E. R., Hansen L. P., Sargent T. J. Mechanics of Forming and Estimating Dynamic Linear Economies // Handbook of Computational Economics. Vol. 1 / H. M. Amman, D. A. Kendrick, J. Rust (eds.). Amsterdam: Elsevier, 1996, pp. 171-252.

4. Auerbach A. J., Gorodnichenko Y. Fiscal Multipliers in Recession and Expansion // NBER Working Paper. 2011. No. 17447.

5. Bachmann R., Sims E. Confidence and the Transmission of Government Spending Shocks // NBER Working Paper. 2011. No. 17063.

6. Banerjee A., Duflo E. Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. N. Y.: PublicAffairs, 2011.

7. Blanchard O., Quah D. The Dynamic Effect of Aggregate Demand and Aggregate Supply Disturbances // American Economic Review. 1989. Vol. 79, No. 4, pp. 655-673.

8. Calvo G. A. Staggered Prices in a Utility-Maximizing Framework // Journal of Monetary Economics. 1983. Vol. 12, No. 3, pp. 383-398.

9. Canova F. Methods for Applied Macroeconomic Research. Princeton: Princeton University Press, 2007, pp. 230-247.

10. Gali J. Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework. Princeton: Princeton University Press, 2008. Ch. 3.

11. Gali J., Gertler M. Inflation Dynamics: A Structural Econometric Analysis (Journal of Monetary Economics. 1999. Vol. 44, No. 2, pp. 195-222).

12. Granger C. W. J. Investigating Сausal Relations by Econometric Models and Crossspectral Methods // Econometrica. 1969. Vol. 37, No. 3, pp. 424-438.

13. Hamilton J. Time Series Analysis. Princeton: Princeton University Press, 1994. Ch. 11.2.

14. Hansen L. P., Sargent T. J. Formulating and Estimating Dynamic Linear Rational Expectations Models // Journal of Economic Dynamics and Control. 1980. Vol. 2, No. 1, pp. 7-46.

15. Ramey V. A. Identifying Government Spending Shocks: It's All in the Timing // Quarterly Journal of Economics. 2011. Vol. 126, No. 1, pp. 1-50.

16. Sims C. A. Macroeconomics and Reality // Econometrica. 1980. Vol. 48, No. 1, pp. 1-48.

17. Taylor J. B. Discretion versus Policy Rules in Practice // Carnegie-Rochester Conference Series on Public Policy. 1993. Vol. 39, No. 1, pp. 195-214.

18. Uhlig H. What Are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure // Journal of Monetary Economics. 2005. Vol. 52, No. 2, pp. 381-419.

19. Woodford M. Interest and Prices: Foundations of a Theory of Monetary Policy. Princeton: Princeton University Press, 2003. Ch. 3.


Review

For citations:


Zamulin O., Styrin K. How to Distinguish Cause and Effect? (2011 Nobel Memorial Prize in Economics). Voprosy Ekonomiki. 2012;(1):4-20. (In Russ.) https://doi.org/10.32609/0042-8736-2012-1-4-20

Views: 751


ISSN 0042-8736 (Print)