The Use of Econometric Models for Long-Term Policies: A Critical View

PSL Quarterly Review, Vol. 66 No. 266, pp. 267-290, anno 2013

24 Pages Posted: 18 Jun 2014

Date Written: September 15, 2013

Abstract

The present work provides a first appraisal of the contribution that econometric models can make to long-run economic policy. Rather than a detailed exposition or critique of the individual models, a more general analysis is provided. The author first outlines the econometric models considered, all of which provide a more or less accurate description of the state of the economic system in some future moment of time. In order to appraise the reliability of the information provided by the models their main relationships are examined from the point of view of their simultaneous working in the context of the whole model. Finally, the author examines what utility the more or less reliable information provided by formal models purporting to represent the hypothetical or desired situation of the economy at a certain date can have for economic policy decisions. The author concludes that there is no available econometric model from which reliable and useful information can be obtained for planning and for economic policy. Moreover, no reliable and useful indication is ever likely to be obtained from so-called consistency models.

Keywords: econometrics, models, economic policy

JEL Classification: C52, C01, B31

Suggested Citation

Spaventa, Luigi, The Use of Econometric Models for Long-Term Policies: A Critical View (September 15, 2013). PSL Quarterly Review, Vol. 66 No. 266, pp. 267-290, anno 2013, Available at SSRN: https://ssrn.com/abstract=2454810

Luigi Spaventa (Contact Author)

University of Rome ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

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