Econometric Macro-Model Building in the Irish Context. Quarterly Economic Commentary Special Article, June 1970

Baker, T.J. and Durkan, J. (1970) Econometric Macro-Model Building in the Irish Context. Quarterly Economic Commentary Special Article, June 1970. [Working Paper]

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Abstract

Building an econometric macro-mociel of any country involves a major commitment of resources--research and clerical manpower, and computer time. This is so because, if it is to. be useful, the model must reflect as accurately · as possible, and in some detail, the complex interaction of forces that generate the time path of the national economy. This can only be done-if it can be done at all-by a close union of detailed, expert opinion on the structure of each sector of the economy and ingenious, tedious experimentation in the econometric field A model of the national economy. is more than a collection of sector by sector studies because great care must be taken t<f specify the interaction of the sectors, but the link between the macro-model builders and the economists who have specialised in various facets of the economy (such as consumptionsavings behaviour, price formation etc.) must be · very close. Since it may not be unreasonable to spend over a year producing a worthwhile study of one aspect of the national economy, · obviously the time to be allocated for producing a useful macro-model must be measured in years. Klein puts it as follows : To build a realistic model of the American economy requires a year in data collection and preparation, another year in estimation with much experimentation following both false and fruitful leads, and finally years more of testing the model, applying it to practical problems. Every two or three years the model must be revised to keep it up to date. The magnitude of the effort involved is a definite drawback of the approach. [7, p. 269]. Unfortunately, the effort required is in no way proportional to the size of the country!

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