When are time series predictions causal? The potential system and dynamic causal effects

Publication information:

Carlson, Jacob, and Neil Shephard. (March) 2026. “When Are Time Series Predictions Causal? The Potential System and Dynamic Causal Effects.”

Abstract

The potential system is a nonparametric time series model for assessing the causal impact of moving an assignment at time $t$ on an outcome at future time $t+h$, accounting for the presence of features.  The potential system provides nonparametric content for, e.g., time series experiments, time series regression, local projection, impulse response functions and SVARs. It closes a gap between time series causality and nonparametric cross-sectional causal methods, and provides a foundation for many new methods which have causal content.