Description Two important new developments have occurred that have significant impact on the evolution of econometrics, namely, the end of the Cold
War and the emergence of the information revolution in nearly all economies of the world.
The information revolution has had significant
effect on data flows, making them much more timely, accessible, and descriptive of more parts of the economy. At the same time, it has
changed the industrial structure of many economies, giving rise to increasing importance of the tertiary sectors (e.g. services). The
new generation of hardware and software enables econometricians to handle larger and more complex problems, especially those that are
data intensive and computer intrusive.
These major events require reconsideration and redrafting of some of the materials of the
original edition.
The present volume retains the original structure of "Lectures on Microeconomic Theory" and takes up principles
of constructing dynamic macroeconometric models and their use in economic analyses and forecasting, while introducing many updates, revisions
and extensions. The description of the econometric methodology has been limited to specific applications of time series analysis, and
the title has been changed to "Principles of Macroeconometric Modeling".
The first four chapters discuss the principles of specifying
equations of structural macromodels, covering both developed marked economies, transition economies and world-wide models. The remaining
chapters cover some major issues in the use of macromodels. The point of departure is model simulation, especially of the prevailing
non-linear models, which is followed by model validation. The analysis of model dynamics covers economic fluctuations and the relevant
implications of non-stationarity. The use of macromodels in policy analysis is presented next; it includes multiplier analysis and scenario
simulations. The monograph ends up with forecasting being a special case of simulation analysis.
Contents
Preface. Models of the Economy as a Whole. What is a model? A Macroeconomic model - a new approach. Another accounting
system, input-output (I-O). Yet another accounting system, flow-of-funds (F/F).
Models of the Centrally Planned and Transition
Economies. The basic framework. Demand determined models. Supply determined systems: the supply side. Fully supply determined
systems. Quasi-supply determined systems. Disequilibrium macromodels. The use of macroeconometric models.
Major Topics in Macromodelling.
Final and intermediate demand functions. Supply determination. Production functions and production potential. Price and wage equations.
Financial flows.
Project Link. The LINK Matrix. The LINK algorithm. Some LINK applications. New directions for LINK.
Simulation. Formulas of simulation. The Gauss-Seidel algorithm: linear case. The Gauss-Seidel algorithm: nonlinear case.
The Newton method. Stochastic simulation.
Model Validation. Sources of error. Descriptive measures of error. Analytical
measures of error. Some limits to accuracy.
Dynamic Analysis. A theory of economic fluctuations. Some sinusoidal limit
theorems for econometric models. Otsuki's sinusoidal limit theorem. Measurement - the spectral approach to the frequency domain. Measurement
- an autoregressive approach in the time domain. Some interpretations of economic dynamics. New directions in time series analysis. VAR
models. Stationarity and non-stationarity. Equilibrium relationships and cointegration analysis. Rational expectations.
Multiplier
and Policy Analysis. Multipliers. Some multiplier tabulations and policy simulations. Optimal economic policy.
Forecasting.
Ex ante prediction. Forecast preparation. The forecast horizon. Combinations of high and low frequency forecasts. Ex ante forecast error.
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