Hostname: page-component-586b7cd67f-2plfb Total loading time: 0 Render date: 2024-11-22T17:55:21.488Z Has data issue: false hasContentIssue false
  • English
  • Français

Macro Modelling at the NIESR: Its Recent History

Published online by Cambridge University Press:  01 January 2020

S.G. Hall  and
S.G.B. Henry
S.G. Hall*
Affiliation:
University of Leicester
S.G.B. Henry*
Affiliation:
NIESR
*
E-mail: [email protected]
E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper charts the evolution of mainly empirical research at the NIESR over the 1970s and 80s. As was all too evident there were very large discrete technical improvements in data handling and manipulation over this period. Less well appreciated were the effects on the economy of major supply-side shocks coming from the World economy leading to ‘Stagflation’ and, interconnected but somewhat later, in the UK, marked changes in macro policy regime. This latter was strongly influenced by the seminal papers of Lucas (1976) and Sims (1980); both highly critical of the then current practices in macroeconomics, though each having very different intellectual stances. The response in the NIESR was to engage at an early stage in these innovations; applying the mantra that an informed criticism was more efficient than an uninformed one. During this period it became a leader in the econometrics of applied macro modelling under different expectations assumptions, including the rational expectations hypothesis (REH). Throughout, it remained critical of the anti-empirical drift encouraged in the Lucas Critique, criticism borne out more recently by the financial instability of the 1990s and the crisis that followed.

Keywords

macroeconomic modellingNIESRrational expectationscointegrationE37E53C45
Type
Research Articles
Information
National Institute Economic Review , Volume 246 , November 2018 , pp. R15 - R23
Copyright
Copyright © 2018 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The opinions expressed in this article are those of the authors and do not necessarily reflect those of the National Institute of Economic and Social Research.

References

Bray, M.M. and Kreps, C. (1984), ‘Rational learning and rational expectations’, mimeo, Cambridge.Google Scholar
Bray, M.M. and Savin, N.E. (1986), ‘Rational expectations equilibria, learning and model specification’, Econometrica, 54, pp. 1129–60.CrossRefGoogle Scholar
Brooks, S. (1981), ‘Systematic econometric comparisons: exports of manufactured goods’, National Institute Economic Review, 97, 1, pp. 67–80.CrossRefGoogle Scholar
Bruno, D. and Sachs, J. (1982), ‘Economics of worldwide stagflation’, Journal of international Economics, 21, 1-2, pp. 187–91.Google Scholar
Carlson, J.A. and Parkin, M. (1975), ‘Inflation expectations’, Economica, 42, 6, pp. 123–38.CrossRefGoogle Scholar
Cuthbertson, K., Henry, S.G.B., Mayes, D. and Savage, D. (1980), ‘Money and the PSBR’, National Institute Economic Review, November, pp. 19–22.CrossRefGoogle Scholar
Ericsson, N.R. and Irons, J.S. (1995), ‘The Lucas Critique; theory without measurement’, Board of Governors of the Federal Reserve System; International Finance Discussion Papers, 506, March.CrossRefGoogle Scholar
Evans, G.W. (1985), ‘Expectational stability and the multiple equilibria problem in linear expectations models’, Quarterly Journal of Economics, 100, pp. 1217–33.CrossRefGoogle Scholar
Evans, G.W. (1986), ‘Selection criteria for models with non-uniqueness’, Journal of Monetary Economics, 18, 2, pp. 147–57.CrossRefGoogle Scholar
Fair, R.C. (1979), ‘An analysis of a macroeconometric model with rational expectations in the bond and stock market’, American Economic Review, 69, pp. 539–52.Google Scholar
Friedman, M. (1968), ‘The role of monetary policy’, American Economic Review, 58, 1, March, pp. 1–17.Google Scholar
Hall, S.G. (1985a), ‘On the solution of large economic models with consistent expectations’, Bulletin of Economic Research, May.CrossRefGoogle Scholar
Hall, S.G. (1985b), ‘An improved solution technique for large economic models with consistent expectations’, System and Control Letters, 5, May.CrossRefGoogle Scholar
Hall, S.G. (1986), ‘An application of the Granger and Engle Two-Step Estimation Technique to UK aggregate wage data’, NIESR discussion paper No.109, Oxford Bulletin of Economics and Statistics, 48, 3.Google Scholar
Hall, S.G. (1987), ‘A forward looking model of the exchange rate’, NIESR discussion paper No. 91, Journal of Applied Econometrics, 2, 1.CrossRefGoogle Scholar
Hall, S.G. (1989), ‘Maximum likelihood estimation of cointegrating vectors: an example of the Johansen Procedure’, Oxford Bulletin of Economics and Statistics, 48, 3.Google Scholar
Hall, S.G. and Brookes, S.J. (1986), ‘The use of prior regressions in error correction models’, Economic Letters, 20.CrossRefGoogle Scholar
Hall, S.G. and Garratt, A (1997), ‘E-equilibria and adaptive expectations: output and inflation in the LBS model’, Journal of Economic Dynamics and Control, 21, 7, pp. 1149–73.Google Scholar
Hall, S.G., Garratt, A. and Currie, D. (1993), ‘Consistent expectations and learning in large scale macroeconometric models’, in Honkapohja, S. and Ingberg, M. (eds), Macroeconometric Modelling and Policy Implications, Volume in honour of Pertti Kukkonen, North Holland.Google Scholar
Hall, S.G. and Henry, S.G.B. (1988), ‘Macroeconomic modelling’, in Jorgenson, D.W. and Waelbroek, J. (eds), Contributions to Economic Analysis Series, Amsterdam: North Holland.Google Scholar
Hall, S.G., Henry, S.G.B. and Wren-Lewis, S. (1987), ‘Employment and stockbuilding: some empirical results of a joint model’, NIESR discussion paper No. 99.Google Scholar
Hendry, D.F. (1995), Dynamic Econometrics, Oxford: Oxford University Press.CrossRefGoogle Scholar
Hendry, D.F and Mizon, G.E (2010), ‘On the mathematical basis of intertemporal optimisation’, Dept of Economics, Oxford University discussion paper 497, August.Google Scholar
Henry, S.G.B. (1981), ‘Incomes policy and aggregate pay’, chapter 2 in Fallick, J.L. and Elliott, R.F. (eds), Incomes Policies, Inflation and Relative Pay, Routledge, George Allen and Unwin.Google Scholar
Henry, S.G.B. (1984), ‘Real wage implications of wage inflation models’, Bulletin of Economic Research, 36, 2, pp. 3307–78.CrossRefGoogle Scholar
Henry, S.G.B. (2018), ‘U.K. macro policy; some effects of its failings’, mimeo.Google Scholar
Henry, S.G.B. and Wren-Lewis, S. (1984), ‘The aggregate labour market in the UK: some experiments with rational expectations models’, in Malgrange, P. and Muet, P. (eds), Contemporary Macroeconomic Modelling, Blackwells.Google Scholar
Klein, L.R. (1955), Short Term Economic Forecasting, NBER Books, Mo. 55–1, August.Google Scholar
Kydland, F.E. and Prescott, E.C. (1977), ‘Rules rather than discretion; the inconsistency of optimal plans’, Journal of Political Economics, 85, 3, June, pp. 473–92.CrossRefGoogle Scholar
Lucas, R.E. (1976), ‘Econometric policy evaluation: a critique, Carnegie-Rochester Conference Series on Public Policy, Elsevier, 1(1), January, pp. 19–46.Google Scholar
Lucas, R.E. and Sargent, T.J. (1979), ‘After Keynesian macroeconomics’, Federal Reserve of Minneapolis Quarterly Review, 3, 2, Spring.Google Scholar
Marcet, A. and Sargent, T.J. (1989a), ‘Convergence of least squares learning in environment with hidden state variables and private information’, Journal of Political Economy, 97, 6, pp. 1306–22.CrossRefGoogle Scholar
Marcet, A. and Sargent, T.J. (1989b), ‘Convergence of least squares learning mechanisms: self referential stochastic models’, Journal of Economic Theory, 48, pp. 337–68.CrossRefGoogle Scholar
Phelps, E.S., Archibald, G.C. and Alchian, A.A. (eds) (1970), The Microfoundations of Employment and Inflation Theory, W.W. Norton.Google Scholar
Sims, C.A. (1980), ‘Macroeconomics and reality’, Econometrica, 48, 1, pp. 1–48.CrossRefGoogle Scholar
Smets, F. and Wouters, R. (2003), ‘An estimated dynamic stochastic general equilibrium model of the Euro Area’, Journal of the European Economic Association, 1(5), pp. 1123–75.CrossRefGoogle Scholar
Surrey, M. (1971), The Analysis and Forecasting of the British Economy, NIESR Occasional Paper No. 25, Cambridge: Cambridge University Press.Google Scholar
Tinbergen, J. (1951), Business Cycles in the United Kingdom, 18879–1914, Amsterdam.Google Scholar
Whitley, J. (1997), ‘Economic models and policy making, Bank of England Quarterly Bulletin, May, pp, 163–71.Google Scholar