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The Macroeconomic Effects of Fiscal Policy: Linking an Econometric Model with Theory

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  • Wren-Lewis, Simon, et al

Abstract

In this paper, the authors outline a method, termed 'theoretical reconstruction,' which allows the system properties of any econometric macromodel to be related to a simpler theoretical model. First, elements of the econometric model which involve significant additional theoretical complexity compared to the theory model are removed. This process continues until the properties of the 'deconstructed' econometric model match those of the reference theory. Second, the econometric model is gradually reconstructed, noting at each point how each element of additional complexity influences the model properties. The technique is illustrated using fiscal policy changes and the U.K. econometric model COMPACT. Coauthors are Julia Darby, Jonathan Ireland, and Ottavio Ricchi. Copyright 1996 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 106 (1996)
Issue (Month): 436 (May)
Pages: 543-59

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Handle: RePEc:ecj:econjl:v:106:y:1996:i:436:p:543-59

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Misunderstanding macroeconomic models
    by Mainly Macro in Mainly Macro on 2014-04-19 23:36:00
  2. [経済]モデルの理論的脱構築
    by himaginary in himaginaryの日記 on 2014-04-20 00:00:00
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Cited by:
  1. A Garratt & K Lee & M H Pesaran & Yongcheol Shin, 1999. "A structural cointegrating VAR approach to macroeconometric modelling," ESE Discussion Papers 8, Edinburgh School of Economics, University of Edinburgh.
  2. S. Sgherri, 1999. "Monetary transmission channels, monetary regimes and consumption behaviour," WO Research Memoranda (discontinued) 602, Netherlands Central Bank, Research Department.
  3. Marcus R. Keogh-Brown & Simon Wren-Lewis & W. John Edmunds & Philippe Beutels & Richard D. Smith, 2010. "The possible macroeconomic impact on the UK of an influenza pandemic," Health Economics, John Wiley & Sons, Ltd., vol. 19(11), pages 1345-1360.
  4. Darby, Julia & Ireland, Jonathan & Leith, Campbell & Wren-Lewis, Simon, 1998. "COMPACT: a rational expectations, intertemporal model of the United Kingdom economy," Economic Modelling, Elsevier, vol. 16(1), pages 1-52, January.

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