For much of the last four decades, leading analysts have used large Keynesian macroeconomic models to prepare macroeconomic forecasts. More recently, VAR models have become a popular alternative. Despite their usefulness in preparing unconditional forecasts, VAR models are unsuitable for policy...

The idea of rational expectations has revolutionized macroeconomics. Several authors believe that the idea can be easily tested by a simple econometric procedure. This paper, however, presents several reasons for questioning the relevance of such tests

Why are forecasts of inflation from VAR models so much worse then their forecasts of real variables? This paper documents that relatively poor performance, and finds that the price equation of a VAR model fitted to U.S. postwar data is poorly specified. Statistical work by other authors has...

Thirty years ago it appeared that the best strategy for improving economic forecasts was to build bigger, more detailed models. As the cost of computing plummeted, considerable detail was added to models and more elaborate statistical techniques became feasible. Yet dissatisfaction with...