The Econometrics of the General Equilibrium Approach to Business Cycles.

The founding fathers of the Econometric Society defined econometrics to be quantitative economic theory. A vision of theirs was the use of econometrics to provide quantitative answers to business cycle questions. The realization of this dream required a number of advances in pure theory--in particular, the development of modern general equilibrium theory. The econometric problem is how to use these tools along with measurement to answer business cycle questions. In this essay, the authors review this econometric development and contrast it with the econometric approach that preceded it. Copyright 1991 by The editors of the Scandinavian Journal of Economics.