Econometric Modelling and Macroeconomics: Intellectual Controversy, Empirical Facts and Future Prospects

Abstract

This paper offers a comprehensive analytical review of a complicated history with many successes and failures, represents the history of Empirical Macroeconomic System Modelling, with the aim of highlighting the importance of Empirical econometric Modelling in addressing macroeconomic issues, including policy analysis and Forecasting. Furthermore, the paper explores prospects and opportunities to develop modelling methods and suggests some areas for strategic investments to push the frontiers of Macro-econometric modelling and academic macroeconomic research.

     The review was mainly based on desk-based research, and the researcher’s own academic experience. Evidence from the findings of various reviewed literatures suggests that “Empirical macro-econometric Modelling occupies a vast area that can be highly useful for policy analysis and Forecasting, thus helping policymakers in the decision-making process. However, choosing the suitable economic model to guide the process of policymaking can also be a challenge in itself, given the inevitable trade-off between the ‘theoretical and empirical coherence’ of the models. Model choice often rests on deep, almost philosophical, views of how the underlying economic structure operates. This means that views often differ between modellers. That said, a number of findings, common across the literature reviewed in this paper, are apparent”.