Uncertainty and Stability in a Macro-Econometric Model

Carlo Bianchi, Jean-Louis Brillet and Lorenzo Panattoni

Annals of Economics and Statistics, 1987, issue 6-7, 347-367

Abstract: One of the main techniques for determining the long term stability properties of a macro-econometric model has been for some time now to compute the eigenvalues of the linearized reduced form of the model. But these eigenvalues are affected by uncertainty, coming mostly from the error on the estimated coefficients. In this paper we study, using the French macro-economic model Mini-DMS, how taking into account the uncertainty can affect the conclusions. We shall give particular attention to the following points: are the conclusions concerning convergence certain, do the eigenvalues change significantly with the period at which the linearization is made, does the use of elasticities instead of multipliers produce significantly more stable eigenvalues.

Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1987:i:6-7:p:347-367

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