Structural Macroeconometrics

Structural Macroeconometrics

Structural Macroeconometrics

Structural Macroeconometrics

Excerpt

Let me only say that what econometrics—aided by
electronic computers—can do, is only to push for
ward by leaps and bounds the line of demarcation
from where we have to rely on our intuition and
sense of smell.

—Ragnar Frisch, Nobel Prize Lecture,
June 1970.

It is a capital mistake to theorize before one has
data. Insensibly one begins to twist facts to suit
theories, instead of theories to suit facts.

—Sir Arthur Conan Doyle

A STEADY STREAM of conceptual and computational advances realized over the past three decades has helped to bridge the gulf that has historically separated theoretical from empirical research in macroeconomics. As a result, measurement is becoming increasingly aligned with theory. The purpose of this text is to provide guidance in bringing theoretical models to the forefront of macroeconometric analyses.

The text is suitable for use as a supplementary resource in introductory graduate courses in macroeconomics and econometrics, and as a primary textbook in advanced graduate courses devoted to the pursuit of applied research in macroeconomics. The lecture notes that ultimately gave rise to the text were designed for this latter purpose. The text's historical perspective, along with its unified presentation of alternative methodologies, should also make it a valuable resource for academic and professional researchers.

Readers of the text are assumed to have familiarity with multivariate calculus, matrix algebra and difference equations, and cursory knowledge of basic econometric techniques. Familiarity with dynamic programming is also useful but not necessary. This is the tool used to map the class of models of interest here into the system of nonlinear expectational difference equations that serve as the point of departure for the empirical methodologies presented in the text. However, familiarity with dynamic programming is not needed to follow the text's presentation of empirical methodologies.

We decided to write this text because through our own teaching and research, we have sought to contribute towards the goal of aligning theory . . .

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