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Nobel Prize winner: Heckman part 3 (Trygve Haavelmo (1989 NP: “for his…
Nobel Prize winner: Heckman part 3
Econometric model building: Frisch-Tinbergen
Frisch:
Econometrics: a research program that consisted in (1) mathematical formulations of economic theories and (2) systematic tests of those using mathematical statistics.
Identification: methods developed to identify patterns/relationships in data
Tinbergen:
Large numerical model estimation
Policy and planning: Frisch-Tinbergen
Frisch
: business cycle theory
Macroeconomic model that describes the demand for money
as a function of consumption and investment
Model was able to generate business cycles
Tinbergen
: business cycle theory
Large numerical model!
Still used for forecasting and policy in many countries
Extended Frisch’s model as a tool for formulating anti-
depression policies
Trygve Haavelmo
1989 NP: “for his clarification of the probability theory foundations of econometrics and his analyses of simultaneous economic structures”.
Contribution:
Pioneering contributions to the foundation of econometrics, i.e., methods used to estimate and test quantitative economic relations
Economic theory and the statistical estimation of theoretical relationships must be regarded in close connection with each other.
Econometric model building: Haavelmo
Principles of econometrics:
Identification problem: extended analysis of Frisch
Simultaneity: all equations in a model should be estimated simultaneously
Autonomy: relationship is unaltered by changes in other relationships that characterize the economy
Clive Granger and Robert Engle
2003 NP:
Granger: “for methods of analyzing economic time series with common trends (cointegration)"
Engle: “for methods of analyzing economic time series with time-varying volatility (ARCH)”.
Contribution:
Granger
: Cointegration methods, to differentiate between, and combine the analysis of, short-term fluctuations and long-term trends
Engle:
Developed methods to study the volatility properties of time series in economics.
Advanced methods dealing with time series analysis.