Abstract Econometricians apply statistical tools to estimate the effects of policies based on observational data. Although econometricians consider the type of inference they are dealing with in their research to be a type of causal inference, they usually avoid direct use of causal terminology. Econometricians and statisticians often rely on the Rubin Causal Model to interpret regression analysis as a type of causal inference. In this paper, I argue (with a focus on instrumental variable estimation) that this endeavour is doomed to failure. I develop an alternative causal interpretation of regression analysis based on structural equation models and show how this interpretation can avoid the problems.

Short-Term Expectation Formation Versus Long-Term Equilibrium Conditions: The Danish Housing Market The primary contribution of this paper is to establish that the long-swings behavior observed in the market price of Danish housing since the 1970s can be understood by studying the interplay between short-term expectation formation and long-run equilibrium conditions. We introduce an asset market model for housing based on uncertainty rather than risk, which under mild assumptions allows for other forms of forecasting behavior than rational expectations. We test the theory via an I(2) cointegrated VAR model and find that the long-run equilibrium for the housing price corresponds closely to the predictions from the theoretical framework. Additionally, we corroborate previous findings that housing markets are well characterized by short-term momentum forecasting behavior. Our conclusions have wider relevance, since housing prices play a role in the wider Danish economy, and other developed economies, through wealth effects. Published in Econometrics

Econometric models and the study of the economic effects of Social Security. This article provides a relatively nontechnical discussion of previously published research on the use of econometric models in the study of the economic effects of social security. It illustrates the role of econometric model building by focusing on three major applications: forecasting, policy simulation, and hypothesis testing. A series of three macroeconomic examples serves to emphasize that the development and use of such models puts the focus of the analysis on the underlying economic structure. The first example presents a program-specific model of the Social Security system, the second a large-scale model of the U.S. economy, and the third a single-equation analysis of a specific issue. Published in Social security bulletin (1984)