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Are forecasting models usable for policy analysis?


  • Christopher A. Sims


In this article, Christopher A. Sims argues the answer to his title is yes. Sims explains that any decisionmaking model must incorporate some identifying assumptions to enable it to forecast the effects of alternative decisions. He argues that although all identifying assumptions in econometric policymaking models are of uncertain validity, those incorporated in vector autoregression (VAR) forecasting models have the advantage of allowing their uncertainty to be measured. Sims concludes by demonstrating a method for identifying a small macroeconomic VAR model so that it can be used to analyze monetary policy

Suggested Citation

  • Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
  • Handle: RePEc:fip:fedmqr:y:1986:i:win:p:2-16:n:v.10no.1

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    References listed on IDEAS

    1. Sargent, Thomas J. & Wallace, Meil, 1983. "A model of commodity money," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 163-187.
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    Forecasting ; Economic policy;


    This item is featured on the following reading lists or Wikipedia pages:
    1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)


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