History Of Macroeconometric Modelling: Lessons From Past Experience

This paper reviews briefly the general literature on macroeconometric modelling and highlights some important lessons from more than half a century of model-building. It appears that from the late 1940s to the 1960s this field has contributed to the expanding knowledge of both economists and econometricians. However, from the early 1970s, several issues invalidated macroeconometric models. These issues are: theoretical contrasts with rational expectations theory, structural instability, the arbitrary division of endo-exogenous variables of the model, the existence of the problem of unit roots (spurious regressions) and insufficient amount of econometric \"know-how\". It is argued that with advancement of econometric \"know-how\", the disparity of opinions between advocates and critics of macroeconometric modelling can be narrowed.