Reflections on global modeling: The state of the art

From their early beginnings in the 1970s, global econometric models have developed in very diverse directions. From the early demand-driven model structures in the Cowles Commission tradition to today’s highly sophisticated Dynamic Structural General Equilibrium (DSGE) models, they have become the primary tool for forecasting and policy analysis at most national and international agencies. Both economic theory and econometric techniques have advanced considerably since the early days of econometric modeling, and a critical examination of the decades-long development of multi-country econometric modeling appears in order. This paper seeks to provide a selective review of both achievements and shortcomings in the field of international econometric modeling, and to suggest possible areas of future research.