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Estimating Investment Functions for a Small-Scale Econometric Model

Author

Listed:
  • Frain, John

    (Central Bank and Financial Services Authority of Ireland)

  • Howlett, Derval

    (Central Bank and Financial Services Authority of Ireland)

  • McGuire, Maurice

    (Central Bank and Financial Services Authority of Ireland)

Abstract

This note summarises the results of an exercise in estimating investment functions for inclusion in a small-scale econometric model of the economy. The overall exercise in model-building is a joint project involving three staff from Economic Analysis, Research and Publications. Its aim is to produce a small-scale model of the economy with reasonably good forecasting and policy simulation properties. One of the main difficulties with previous versions of the model and, indeed, with some other models of the Irish economy is their relatively unsatisfactory modelling of investment. The estimated equations generally have poor fit compared to other areas of the model resulting in rather large forecast errors and undermining confidence in policy simulations.

Suggested Citation

  • Frain, John & Howlett, Derval & McGuire, Maurice, 1996. "Estimating Investment Functions for a Small-Scale Econometric Model," Research Technical Papers 1/RT/96, Central Bank of Ireland.
  • Handle: RePEc:cbi:wpaper:1/rt/96
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