[go: up one dir, main page]

  EconPapers    
Economics at your fingertips  
 

Time to reject the privileging of economic theory over empirical evidence? A Reply to Lawson (2009)

Katarina Juselius

No 09-16, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: The present financial and economic crisis has revealed a systemic failure of academic economics and emphasized the need to re-think how to model economic phenomena. Lawson (2009) seems concerned that critics of standard models now will fill academic journals with contributions that make the same methodological mistakes, albeit in slightly different guise. In particular, he is rather sceptical to use of mathematical statistical models, such as the CVAR approach, as a way of learning about economic mechanisms. In this paper I discuss whether this is a relevant claim and argue that it is likely to be based on a misunderstanding of what a proper statistical analysis is and can offer. In particular, I argue that the strong evidence of (near) unit roots and (structural) breaks in economic variables suggests that standard economic models need to be modified or changed to incorporate these strong features of the data. Furthermore, I argue that a strong empirical methodology that allows data to speak freely about economic mechanisms, such as the CVAR, would ensure that important information in the data is not over heard when needed. Adequately applied such models would provide us with an early warnings system signalling that the economy is moving seriously out of equilibrium.

Keywords: economic crisis; Dahlem report; CVAR approach; Theory-first; Reality-first; Imperfect Knowledge Expectations; non-stationary data (search for similar items in EconPapers)
JEL-codes: A1 B4 C3 C5 E0 E1 E2 E6 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2009-08
New Economics Papers: this item is included in nep-cba, nep-ecm and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/dp_2009/0916.pdf/ (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0916

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().

 
Page updated 2024-12-24
Handle: RePEc:kud:kuiedp:0916