The Role of Macro-Economic Models in Short-term Forecasting

July 1, 1965

Econometrica, Vol. 34, No. 4, October, 1966, pp. 862-872

The assumptions underlying the application of econometric models to short-term forecasting are discussed and examined. It is suggested that the distinction between predictor variables estimated from outside information and predicted variables to be estimated by the equations of the model should follow practical rather than theoretical considerations. An illustration in the form of a simple prediction model for Ireland is given.