Causal ordering in economic models

摘要

In this paper, a framework is introduced in which economic models can be represented in a graphical way using causal ordering. This framework unifies the existing approaches of causal ordering in the literature. On the basis of locally imposed directions of causality (derived from the underlying economic theory) global causal dependencies can be derived for the whole model. The result is a graphical representation of the causal dependencies of the model, called a signed causal-ordering graph. On the basis of a small example taken from the area of public finance, it is pointed out what kind of conclusions can be drawn from the signed causal-ordering graph. The conclusions of this kind of qualitative analysis can be viewed as a hypothesis which requires subsequent empirical analysis in order to see if the hypothesis can be rejected.