What are the US and MC Models and Why Use Them Over Commercial Models?
The US Model
The United States (US) model was developed by Ray C. Fair in 1974-1976, and it has been used since then for research, forecasting, policy analysis, and teaching. It has been available for use on personal computers since 1983 and was the first such model to be so. (And it was first on the Web!) The current version contains 30 stochastic equations and about 100 identities. The data base begins in the first quarter of 1952. The basic estimation technique is two-stage least squares. The model accounts for all flow-of-fund and balance-sheet constraints, which makes it useful for considering various monetary policy options.

Each quarter the data base is updated, the model is reestimated, and a new forecast is made. The forecasts are not subjectively adjusted (no constant adjustments). The current estimation period is 1954:1-2003:4, and the current forecast period is 2004:1-2007:4.

The main strength of the US model is that it is probably the best approximation of the U.S. economy available. It has been extensively tested and analyzed, and unlike commercial models, it does not have to be subjectively adjusted to produce accurate forecasts. You can have more confidence using the model than using commercial models that the results are actually telling you something about how the macro economy works. Commercial models are not even consistently estimated, even though consistent techniques have been available for over 40 years, whereas the US model has been consistently estimated from its beginning. The past forecasting record of the model is updated each quarter, so the user always has a complete record of how the model has done. The four-quarter-ahead mean absolute error is currently 1.14 percentage points for the real GDP growth forecasts and 0.56 percentage points for the inflation forecasts (79 forecasts---the first one dated September 23, 1983). See The Forecasting Record of the US Model.

The MC Model
The multicountry model was developed in the early 1980s by Ray C. Fair, and the first complete description of it is in Fair (1984). The latest version is presented in Estimating How the Macroeconomy Works. The model consists of estimated structural equations for 38 countries. There are also estimated trade share equations for 58 countries plus an "all other" category, labelled "AO". The trade share matrix is thus 59 x 59. The US model is part of the MC model. The non United States part of the MC model is called the "ROW" (rest of world) model. The data for the non US countries begin in 1960. Some of the country models are annual rather than quarterly. The estimation periods vary from country to country, and the forecast period ends in 2006:4. The estimation technique for all the countries is two stage least squares except when there are too few observations to make the technique practical, where ordinary least squares is used.

See The MC Model Workbook for discussion of how to work with the model on line and for examples of experiments that can be performed using the model. Among other things, the output part of this site's software allows you to examine the data on the trade flow variables. You can, for example, examine the actual and predicted values of the level of exports from Canada to China.