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History Of Macroeconometric Modelling: Lessons From Past Experience

  • Abbas Valadkhani

This paper reviews briefly the general literature on macroeconometric modelling and highlights some important lessons from more than half a century of model-building. It appears that from the late 1940s to the 1960s this field has contributed to the expanding knowledge of both economists and econometricians. However, from the early 1970s, several issues invalidated macroeconometric models. These issues are: theoretical contrasts with rational expectations theory, structural instability, the arbitrary division of endo-exogenous variables of the model, the existence of the problem of unit roots (spurious regressions) and insufficient amount of econometric \"know-how\". It is argued that with advancement of econometric \"know-how\", the disparity of opinions between advocates and critics of macroeconometric modelling can be narrowed.

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File URL: http://external-apps.qut.edu.au/business/documents/discussionPapers/2003/DP%20No%20131.pdf
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Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 131.

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Date of creation: 20 Jan 2003
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Handle: RePEc:qut:dpaper:131
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Web page: http://www.bus.qut.edu.au/faculty/economics/
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  2. Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
  3. Garratt, A. & Lee, K. & Pesaran, M. H. & Shin, Y., 1998. "A Long-run Structural Macro-econometric Model of the UK," Cambridge Working Papers in Economics 9812, Faculty of Economics, University of Cambridge.
  4. Sargent, Thomas J, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 207-37, April.
  5. Ronald G. Bodkin & Lawrence R. Klein & Kanta Marwah, 1991. "A History of Macroeconometric Model-Building," Books, Edward Elgar Publishing, number 51.
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  8. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991. "Stochastic trends and economic fluctuations," Working Paper Series, Macroeconomic Issues 91-4, Federal Reserve Bank of Chicago.
  9. Engle, R. & Hendry, D., 1990. "Testing Super Exogeneity And Invariance In Regression Models," Economics Series Working Papers 99100, University of Oxford, Department of Economics.
  10. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-97, July.
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  12. Fair, Ray C, 1974. "An Evaluation of a Short-Run Forecasting Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(2), pages 285-303, June.
  13. Sastry, V K, 1975. "The Use of Macroeconomic Regression Models of Developing Countries: A Comment," Oxford Economic Papers, Oxford University Press, vol. 27(1), pages 156-65, March.
  14. Griliches, Zvi, 1986. "Economic data issues," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 25, pages 1465-1514 Elsevier.
  15. Victor Zarnowitz, 1978. "On the Accuracy and Properties of Recent Macroeconomic Forecasts," NBER Working Papers 0229, National Bureau of Economic Research, Inc.
  16. Sowey, Eric & Hargreaves, Colin, 1991. "Dissemination of macroeconometric models: Is a new age dawning?," Journal of Policy Modeling, Elsevier, vol. 13(4), pages 599-621.
  17. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  18. Francis X. Diebold, 1997. "The past, present, and future of macroeconomic forecasting," Working Papers 97-20, Federal Reserve Bank of Philadelphia.
  19. Favero, Carlo A., 2001. "Applied Macroeconometrics," OUP Catalogue, Oxford University Press, number 9780198296850, May.
  20. Willman, Alpo & Kortelainen, Mika & Mannisto, Hanna-Leena & Tujula, Mika, 2000. "The BOF5 macroeconomic model of Finland, structure and dynamic microfoundations," Economic Modelling, Elsevier, vol. 17(2), pages 275-303, April.
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  24. Schlicht, Ekkehart, . "Isolation and Aggregation in Economics," Monographs in Economics, University of Munich, Department of Economics, number 3, June.
  25. Zarnowitz, Victor, 1978. "On the Accuracy and Properties of Recent Macroeconomic Forecasts," American Economic Review, American Economic Association, vol. 68(2), pages 313-19, May.
  26. Jeffrey Nugent, 1975. "Policy-Oriented Macroeconometric Models for Development and Planning," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 4, number 4, pages 509-529 National Bureau of Economic Research, Inc.
  27. Jere R. Behrman & James Hanson, 1979. "Short-Term Macroeconomic Policy in Latin America," NBER Books, National Bureau of Economic Research, Inc, number behr79-1, October.
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  29. Bodkin, Ronald G. & Marwah, Kanta, 1988. "Trends in macroeconomic modeling: The past quarter century," Journal of Policy Modeling, Elsevier, vol. 10(2), pages 299-315.
  30. Pesaran, M. H. & Smith, R. P., 1985. "Evaluation of macroeconometric models," Economic Modelling, Elsevier, vol. 2(2), pages 125-134, April.
  31. Jordi Galí, 1992. "How Well Does The IS-LM Model Fit Postwar U. S. Data?," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 709-738.
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