The London Business School Econometric Model: An Update 1992

This Economic Outlook presents a forecast produced on a large, with more than 700 variables, econometric model of the UK developed over the last 25 years by researchers at the Centre for Economic Forecasting. As macroeconomic theory is not static, new equations are regularly incorporated into the model framework to replace, or augment, older ones with the aim of improving our understanding of the UK economy. The best way to assess the impact of changes to the model is to perform a series of simulation exercises and compare the results of the system as a whole with established theoretical priors. In this paper we discuss the most recent changes to the structure of the model and describe the results from four simulation exercises.