HAAVELMO’S PROBABILITY APPROACH AND THE COINTEGRATED VAR

Some key econometric concepts and problems of great importance to Trygve Haavelmo and Ragnar Frisch are discussed within the general framework of a cointegrated VAR. The focus is on problems typical of time-series data such as multicollinearity, spurious correlation and regression, time dependent residuals, model selection, missing simultaneity, autonomy, and identification. The paper argues that the more recent development of unit root econometrics has been instrumental for a solution to the above problems.