MACROECONOMETRIC MODEL EVALUATION,WITH SPECIAL REFERENCE TO THE NIF88 MODEL*

This paper has argued that a mixture of procedures is required for the evaluation of a macroeconomic model. Both individual equations and overall model properties are involved, while both formal tests and an informal understanding of the model are needed. The procedures advocated reflect the need for evaluation to be informative and manageable. The bulk of the statistical testing is best conducted at the single equation stage. Evaluation of single equations involves:

• (i) employing a battery of diagnostic tests;
• (ii) specification and stability tests should be designed, where possible, to enhance the power of the test conducted, including by making use of external information;
• (iii) procedures designed to detect influence of particular observations can provide
• (iv) comparison with other information, both from other empirical investigations and from theoretical priors, is necessary to ensure sound results.