This document, Testing Macroeconometric Models (MC1 Version), is the main reference for the MC1 model. It updates the material in Ray C. Fair, Testing Macroeconometric Models, Harvard University Press, 1994 (to be called the "1994 book"), through the MC1 model. Chapters 1 and 2 are exactly as in the book, but Chapters 3, 5, 6, and Appendices A and B have been updated.

In transferring the chapters to HTML, the following conventions were adopted. 1) Footnotes appear in brackets in the text. 2) <> denotes "change in." It is used in place of the Greek capital delta. 3) * denotes multiplication, as does a dot: .. 4) Finally, the footnotes in square brackets are footnotes from the book; they are not, for example, additional site footnotes. Additional site footnotes appear in wiggly brackets, { }, and are usually just at the beginning of a chapter or section.

Chapter 1 contains introductory material, Chapter 2 discusses the theory behind the models, and Chapter 3 describes the data and general specifications. These three chapters are for both the US and MC models.

Chapter 5 discusses the stochastic equations of the US model. The version of the US model that is described in this chapter is dated November 1, 1996, and the "Chapter 5 tables" that go with this version are presented after Appendix A.

Chapter 6 discusses the stochastic equations of the MC model except those of the US model. The MC model less the US model is called the "ROW" model. The latest estimates of the ROW model are presented after Appendix B in what are called the "Chapter 6 tables." These tables are dated May 21, 1997, and pertain to the version of the ROW model used for the MC1 model. Appendix B lists all the variables and equations of the ROW model.

The US Model Workbook is a good substitute for the chapters in this document for beginning users who are working with the US model. The MC1 Model Workbook, on the other hand, is not a substitute for the chapters in this document. The MC1 workbook contains only applications, and it assumes that the chapters in this document have been read first.

Finally, it should be stressed that the complete 1994 book contains much discussion of the estimation, testing, and analysis of models, which is not reproduced here. The following material just concerns the specification and estimation of the US and ROW models.