Modelling the Australian Economy

It would not be rash to assert that the most dramatic and significant development in economics since the end of the War has been the emergence of large-scale macro-dynamic econometric models. By the term 'macro-dynamic econometric model' we mean a set of numerical relationships which link the familiar key economic aggregates such as gross domestic product, the unemployment rate, the rate of inflation, the rate of increase of the money stock and the balance of trade and which, by this means, is able to track each of these aggregates over time. By a 'large-scale' macro-dynamic econometric model we mean one which consists not of five or ten relationships but of hundreds or even thousands. Large-scale macro-dynamic econometric models now exist for all advanced industrial countries and are widely used for policy-making. forecasting and hypothesis testing.