Causal Arrows in econometric Models

Econometrics applies statistical methods to study economic phenomena. Roughly, by means of equations, econometricians typically account for the response variable in terms of a number of explanatory variables. The question arises under what conditions econometric models can be given a causal interpretation. By drawing the distinction between associational models and causal models, the paper argues that a proper use of background knowledge, three distinct types of assumptions (statistical, extra-statistical, and causal), and the hypothetico-deductive methodology provide sufficient conditions for a causal interpretation of econometric models.