Making a match: Combining theory and evidence in policy-oriented macroeconomic modeling

Kapetanios, G, Pagan, A., & Scott, A. (2007) Making a match: Combining theory and evidence in policy-oriented macroeconomic modeling. Journal of Econometrics, 136(2), pp. 565-594.

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Abstract

A persistent question in the development of models for macroeconomic policy analysis has been the relative role of economic theory and evidence in their construction. This paper looks at some popular strategies that involve setting up a theoretical or conceptual model (CM) which is transformed to match the data and then made operational for policy analysis. A dynamic general equilibrium model is constructed that is similar to standard CMs. After calibration to UK data it is used to examine the utility of formal econometric methods in assessing the match of the CM to the data and also to evaluate some standard model-building strategies.

Keywords: Policy oriented economic modeling; Model evaluation; VAR models

Impact and interest:

20 citations in Scopus
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13 citations in Web of Science®

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ID Code: 32937
Item Type: Journal Article
Refereed: Yes
DOI: 10.1016/j.jeconom.2005.11.007
ISSN: 03044076
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Elsevier
Deposited On: 24 Jun 2010 22:53
Last Modified: 29 Feb 2012 13:45

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