Essays Macro - econometrics

Shortly after World War II, many of the leading econometricians collaborated under the aegis of the Cowles Commission and, over the course of a few years, developed a research agenda that structured macroeconometrics for the second half of the 20th century. The central vision of this research program was simple: the development of a mathematical model of the macroeconomy with grounding in economic theory, with parameters estimated using sound statistical methods, tested against and thus consistent with empirical evidence. The resulting macroeconomic model should be useful for testing economic theories, for macroeconomic forecasting, as for advising policymakers. This vision provides a useful backdrop against which to assess the achievements of macroeconometrics over the past half century and the challenges remaining. Where have we succeeded within this research program? How has the original vision been extended and modi"ed? And what challenges remain? I address these questions in the context of four topics within macroeconomics that have seen signi"cant research e!orts which produced durable advances. These remarks should be interpreted as a$rming the importance of the research area even as they highlight what I consider to be important weaknesses that need to be resolved by further research. IV methods. An essential part of the Cowles research program was the development of econometric tools for reliable and statistically e$cient inference about relationships among economic variables. Central among these tools was the recently invented method of instrumental variables (IV) regression. Steady work by leading macroeconometricians over the subsequent decades have extended these methods far beyond the linear models with i.i.d. Gaussian