The Ordinary Business of Macroeconometric Modeling: Working on the Fed-MIT-Penn Model (1964–1974)

29 Pages Posted: 7 Nov 2018

See all articles by Roger Backhouse

Roger Backhouse

University of Birmingham - Department of Economics; Erasmus University Rotterdam (EUR) - Erasmus Institute for Philosophy and Economics (EIPE)

Beatrice Cherrier

CNRS; University of Cergy-Pontoise - THEMA

Date Written: October 15, 2018

Abstract

The FMP model exemplifies the Keynesian models later criticized by Lucas, Sargent and others as conceptually flawed. For economists in the 1960s such models were “big science”, posing organizational as well as theoretical and empirical problems. It was part of an even larger industry in which the messiness for which such models were later criticized was endorsed as providing enabling modelers to be guided by data and as offering the flexibility needed to undertake policy analysis and to analyze the consequences of events. Practices that critics considered fatal weaknesses, such as intercept adjustments or fudging, were what clients were what clients paid for as the macroeconometric modeling industry went private.

Keywords: Macroeconometrics, Modigliani, Ando, De Leeuw, Gramlich, Federal Reserve, Lucas Critique, Modeling

JEL Classification: B22, B23, B4

Suggested Citation

Backhouse, Roger and Cherrier, Beatrice, The Ordinary Business of Macroeconometric Modeling: Working on the Fed-MIT-Penn Model (1964–1974) (October 15, 2018). Available at SSRN: https://ssrn.com/abstract=3266559 or http://dx.doi.org/10.2139/ssrn.3266559

Roger Backhouse

University of Birmingham - Department of Economics ( email )

Economics Department
Birmingham, B15 2TT
United Kingdom

Erasmus University Rotterdam (EUR) - Erasmus Institute for Philosophy and Economics (EIPE) ( email )

P.O. Box 1738
EIPE Office, Room H5-23
3000 Dr Rotterdam
Netherlands

Beatrice Cherrier (Contact Author)

CNRS ( email )

3, rue Michel-Ange
Paris, 75794
France

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

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