vector autoregressive methods were complemented by an important body

of empirical research. Sims has served as an effective advocate and critic

of the extensively used vector autoregressive statistical methods. Motivated

by his own and related empirical research, Sims is one of the leaders in

rethinking how monetary policy should be modeled and reconsidering

the channels by which monetary policy in¬‚uences economic aggregates.

This interview with Chris Sims gives an opportunity to explore further

the context of many of these contributions. Sims typically has a unique

Reprinted from Macroeconomic Dynamics, 8, 2004, 273“294. Copyright © 2004

Cambridge University Press.

210 Lars Peter Hansen

perspective on many economic

problems, a perspective that is

articulated in his answers to a

variety of questions.

Hansen: In looking back at

your time as a graduate student

at Berkeley and Harvard in the

mid-sixties, what were the im-

portant in¬‚uences that shaped

your thinking about economics

and econometrics?

Sims: Actually, I started taking

graduate courses in statistics and

econometrics when I was an

undergraduate at Harvard. I was a

math major as an undergraduate,

and in my senior year, I started

Figure 10.1 Christopher A. Sims.

taking some economics. I took a

graduate course in econometrics

from Henk Houthakker, who later became my adviser; and I took a

graduate statistics course from Dempster.

Both classes were in¬‚uential, but by that time I already knew that I

was interested in both economics and statistics. I did contemplate going

Figure 10.2 The meeting of the National Academy of Sciences, 1999.

From left to right: Buz Brock, Roy Radner, Chris Sims, John Chipman, and

D. Gale Johnson.

An Interview with Christopher A. Sims 211

to graduate school in mathematics, and I remember discussing that with

my adviser early in my senior year, but in the end I decided to go to

graduate school in economics. I went to Berkeley for one year in 1963,

where I had ¬rst-year econometrics from Dale Jorgenson and ¬rst-year

economic theory from Dan McFadden. I then moved to Harvard, not

because I was discontented with Berkeley academically, but for personal

reasons. At Harvard, I took some more economic theory, but I™m not

sure I took econometrics at that point. I worked with Houthakker on

my dissertation. I wrote on embodied technological progress, in which all

previous models were posed in discrete time. Houthakker had just written

a book on formulating models of consumption in continuous time, so he

told me I should formulate my models in continuous time. Following

this advice forced me to learn a lot of mathematics. Most importantly, he

put me in contact with Chipman who was at Harvard at the time, and

knew the relevant mathematics. All of this probably had some in¬‚uence

on the fact that I later wrote papers about approximation in continuous

and discrete time.

Hansen: Your early research considered a variety of problems connected

to statistical approximation. This work includes the study of discrete-time

approximation of continuous-time models [Sims (1971)], the approx-

imation of ¬nite-parameter distributed-lag models to more general dynamic

economic models [Sims (1972)], and the general problem of statistical

approximation in rich or high (in¬nite) dimensional parameter spaces

[Sims (1971)]. Much of this research predated related work in statistics

and elsewhere. What was the original impetus for this work?

Sims: Some of the impetus for thinking about continuous- and discrete-

time modeling was due to Houthakker. The vintage models I was working

with easily let one express output as a function of the history of invest-

ment, but I needed to express productivity as a function of the history of

output. This involved-¬nding the inverse of linear operators whose kernels

were nice functions. In discrete time, this is fairly straightforward, but in

continuous time it leads to generalized functions. This was mathemat-

ically much more complicated than what Houthakker had done in his

own work on consumption. I learned the technical tools that allowed me

to address this and related approximation problems. The impetus for

my work on approximation was then partly that I was technically ready to

address these issues in approximation and partly that I was not very

satis¬ed with the big gap between economic theory and econometric

theory. Dynamic economic theory was often posed in continuous time

and econometric theory presumed an econometrician was supposed to

have a true model, written down in discrete time, about which nothing

was unknown except parameter values.

212 Lars Peter Hansen

Hansen: How were these papers originally received? They must have

looked technically intimidating to many economists at the time.

Sims: Well I think at the time a lot of people didn™t read them. So

they didn™t get intimidated. The paper [Sims (1971c)] on continuous

and discrete approximation was submitted to Econometica for con-

sideration. The less sympathetic referee report claimed that everything

done in the paper had already been done before. While Dale Jorgenson

had previously discussed the rational approximation of lag distributions,

the implied sense of approximation was too weak for statistical approx-

imation. This issue had nothing to do with continuous- and discrete-

time approximation, however. So, the referee hadn™t even realized that

there was a difference between approximation of a lag distribution and

approximation of a continuous-time model by the estimated discrete-

time model.

Since the work on in¬nite-dimensional spaces was technically beyond

what was appearing in economics journals, I sent Sims (1971d) to the

Annals of Mathematical Statistics. After what, for an economics journal,

was a relatively short time, the editor wrote: “Sorry it™s taken so long.

I had a hard time ¬nding any referees. Here™s a referee report.” The

referee report said, “I really don™t understand what this paper is about,

but I™ve checked some of the theorems and they seem to be correct, so

I guess we should publish it.”

At the time I don™t think that many econometricans or economists

read it. Tom Sargent was an exception. He read my papers on approx-

imating continuous-time models and my Journal of the American Statist-

ical Association paper [Sims (1974e)] on approximation of discrete-time

distributed-lag models that use frequency-domain methods, and he became

a promoter of them. Tom was, of course, an important reader, and his

in¬‚uence got the work some attention, but it™s true that most economists

found these methods hard to follow.

Hansen: Your ¬rst job was as an assistant professor at Harvard. What

was it like being a junior faculty member there?

Sims: It was probably not that much different from being a junior faculty

member almost anywhere. Harvard was certainly different from Minnesota

where I moved to later, though. I actually contemplated leaving Harvard

immediately for Minnesota, when I ¬nished my Ph.D. The reason I

didn™t was that they announced, during the time when I was ¬nishing my

degree, that they were hiring Griliches and Jorgenson. I thought it would

be interesting to overlap with them for a little while, and it was. But after

two years there, I decided to move to Minnesota, which was a much

livelier place. There was a sense of intellectual excitement at Minnesota

that I didn™t have at Harvard at that time.

An Interview with Christopher A. Sims 213

Hansen: I know that macroeconomists in the seventies, including

Friedman, were intrigued by your paper: “Money, Income and Causality”

[Sims (1972b)]. Was this the ¬rst of your applied papers to attract con-

siderable interest? What type of reactions did it elicit from macroeconomists?

Sims: It is fair to say that this was the ¬rst of my macroeconomic

papers that elicited considerable interest. There were two other things

that I can think of that went before it that were applied. My paper [Sims

(1969)] on double de¬‚ation of value added still does occasionally

get cited by people. Index number theory is something that not many

people today pay attention to. Every few years somebody thinks about