Some Estimation Effects of Selecting Economic Policy Horizons for Macroeconomic Models

Christopher M. Adam

The Economic Record, 1980, vol. 56, issue 155, 374-377

Abstract: A basic IS‐LM model is used to discuss how parameter estimates may be affected if the observation period on data collected by policy makers (the model builders) differs from that of agents whose behaviour generates the data but who are not policy makers. Estimates may be both biased and inconsistent. In addition. the statistical inconsistency is a function not only of the difference in time horizons. but of the values of the policy instruments used by the policy makers. Optimal economic policy here thus involves the establishment òf instrument settings and particular levels of statistical inconsistencies in the estimated models.

Date: 1980
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https://doi.org/10.1111/j.1475-4932.1980.tb01690.x

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