Current Versions and References

There are a number of versions of the models that can be used on this site, but most users are only interested in the current versions. Each quarter the US model is reestimated based on the latest available data, and sometimes small specification changes are made in this updating process. There is thus in effect a different version of the US model each quarter. Each version is dated, where the date is the day of the release of the forecast from the version. Selected forecasts from each version are presented in The Forecasting Record of the US Model, where the first date is September 23, 1983. The phrase "US model" is used on this site to refer both to the generic model and to any particular version. It would be too cumbersome to have a different name for each version.

The multicountry model is updated less often than is the US model, and only three versions have been put on this site for use by others. The "MC1" version is dated May 21, 1997, the "MC2" version is dated December 27, 1998, and the "MC3" version is dated April 27, 2001. The phrase "MC model" is used on this site to refer both to the generic multicountry model and to any particular version. The phrase "ROW model" is used to refer to the non-US part of the MC model.

The main reference for this site is Macroeconometric Modeling. It is based, among other things, on two books: Ray C. Fair, Testing Macroeconometric Models, Harvard University Press, 1994, (on site, Amazon online order form ), which will be called the "1994 book" in what follows, and Ray C. Fair, Specification, Estimation, and Analysis of Macroeconometric Models, Harvard University Press, 1984, (on site, Amazon online order form ).

The 1994 book contains a complete listing of the variables and equations of the version of the MC model that existed at the time the book was written. The US model is listed in Appendix A of the book, and all the coefficient estimates of the US stochastic equations are presented in tables in Chapter 5 (called the "Chapter 5 tables" on this site). The ROW model is listed in Appendix B of the book, and all the coefficient estimates of the ROW stochastic equations are presented in tables in Chapter 6 (called the "Chapter 6 tables" on this site).

The following lists the current versions of the US and MC models and the relevant references:

US Model, current version (April 25, 2003)

  • Equations (April 25, 2003): Appendix A and the Chapter 5 tables in The US Model Workbook.
  • Discussion: Macroeconometric Modeling and The US Model Workbook. The changes that were made from the April 27, 2001, version to the current version are the following:
    • Equation 1 (CS, consumer expenditures: services): The time trend T has been added to the equation.
    • Equation 3 (CD, consumer expenditures: durables): The left hand side variable is now CD/POP - (CD/POP)-1, and on the right hand side (CD/POP)-1 has been replaced by DELD*(KD/POP)-1 - (CD/POP)-1. This incorporates a slightly different partial adjustment assumption.
    • Equation 4 (IHH, residential investment--h): The left hand side variable is now IHH/POP - (IHH/POP)-1, and on the right hand side (IHH/POP)-1 has been replaced by DELH*(KH/POP)-1 - (IHH/POP)-1. This incorporates a slightly different partial adjustment assumption. Also, the asset variable has been dropped from the equation.
    • Equation 5 (L1, labor force--men 25-54): The variables log(WA/PH) and T have been dropped, and the variables log(AA/POP)-1 and UR have been added.
    • Equation 6 (L2, labor force--women 25-54): The variable log(AA/POP)-1 has been added.
    • Equation 7 (L3, labor force--all others 16+): The Variable T has been dropped, and the variable log(AA/POP)-1 has been added.
    • Equation 9 (MH, demand deposits and currency--h): The equation is now estimated under the assumption of a fourth order autoregressive error term, and a dummy variable has been added that is 1 in 1998:1 and 0 otherwise.
    • Equation 11 (Y, production--f): The equation is now estimated in log form, and the dummy variables D593, D594, and D601 have been added to pick up the effects of the steel strike.
    • Equation 12 (KK, stock of capital--f): The interest rate variable used is now an estimate of the real AAA bond rate lagged twice. In addition, another cost of capital variable has been added: (CG-2 + CG-3 + CG-4)/ (PX-2YS-2 + PX-3YS-3 + PX-4YS-4). The left hand side variable is now log(KK/KK-1), and the right hand side variables are in addition to the two cost of capital variables: the constant term, log(KK/KKMIN)-1, log(KK-1/KK-2, and five change in output terms. log(KK/KKMIN)-1 is an estimate of the amount of excess capital on hand.
    • Equation 13 (JF, number of jobs--f): All variables related to DD772 have been dropped, and variable T has been dropped. The dummy variable D593 has been added to pick up effects of the steel strike. The excess labor variable is now defined to be log[JF/(JHMIN/HFS)]-1.
    • Equation 14 (HF, average number of hours paid per job--f): All variables related to DD772 have been dropped, and variable T has been dropped. The excess labor variable is now defined to be log[JF/(JHMIN/HFS)]-1, and logHF-1 is replaced by log(HF/HFS)-1..
    • Equation 17 (MF, demand deposits and currency--f): A dummy variable has been added that is 1 in 1998:1 and 0 otherwise.
    • Equation 21 (CCF, capital consumption--f): The dummy variables D811824 and D831834 have been dropped, and nine dummy variables have been added to account for tax law changes. The constant term has also been added.
    • Equation 25 (CG, capital gains or losses on corporate stocks held by h): The divisor is now PX-1YS-1 rather than GDP-1.
    • Equation 27 (IM, imports): The variable T has been dropped, and the equation is now estimated under the assumption of a second order autoregressive error term.
    • All the equations that are estimated by 2SLS have been estimated using fewer first stage regressors. None of the equations now rejects the overidentifying restrictions at the 95 percent confidence level. .
MC Model, current version (MC3) (April 27, 2001)