Econometric Evaluation of Linear Macro-Economic Models

Yock Y. Chong and David Hendry

The Review of Economic Studies, 1986, vol. 53, issue 4, 671-690

Abstract: Macro-economic models are generally designed to achieve a multiplicity of objectives and correspondingly, they have been evaluated using a vast range of statistical, econometric, economic, political and even aesthetic criteria. However, in so far as they claim to represent economic behaviour, empirical macro-economic systems are certainly open to direct evaluation and testing against data information. The last few years have witnessed a substantial growth in the literature on econometric evaluation techniques, but despite important improvements in formalising evaluation procedures and their increased scope, formidable problems confront any investigation of a high dimensional, non-linear, stochastic, dynamic structure. Since system characteristics are the prime concern of economy-wide models, it might be the case that the validity of every individual component is not essential to adequate overall performance. While this viewpoint is debatable it does draw attention to the need for system evaluation procedures, at which point data limitations pose serious constraints on formal tests. Thus a new "limited information" test of forecast encompassing is proposed, based only on forecasts and requiring no other data from a model's proprietors. The derivation, merits and drawbacks of such a test are presented together with some suggestions for testing entailed relationships and inter-equation feedbacks.

Date: 1986
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (302)

Downloads: (external link)
http://hdl.handle.net/10.2307/2297611 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:53:y:1986:i:4:p:671-690.

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().