Evaluating Macroeconometric Modelling with Regard to Usefulness: a Survey

Macroeconometric models have during the last 40 years played an important role as a tool to guide decision making in public as well as private macroeconomic institutions. However, such models have not been much used in academic circles. We argue that macroeconometric models have problems both with regard to internal and external validity. Although the science of econometrics has partly answered the problem of internal validity, macroeconometric modelling is still dismissed by theorists as inappropriate for theoretical development. We find that the argument over how to evaluate macroeconometric modelling can be viewed as a result of the relationship between observed economic variables and economic theory.