Causal Transmission in Reduced-Form Models

Vassili Bazinas and Bent Nielsen
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Bent Nielsen: Department of Economics & Nuffield College, University of Oxford, Oxford OX1 1NF, UK

Econometrics, 2022, vol. 10, issue 2, 1-25

Abstract: We propose a method to explore the causal transmission of an intervention through two endogenous variables of interest. We refer to the intervention as a catalyst variable. 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 instrumental variable analysis and Cholesky decomposition of structural vector autoregressions. We give conditions for uniqueness of the causal transmission.

Keywords: causality; structural vector autoregression; instrumental variables; graphical models; cointegration (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Causal transmission in reduced-form models (2015)
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