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Economic Quarterly

Summer 1999

Two Approaches to Macroeconomic Forecasting

Roy H. Webb

For much of the last four decades, leading analysts have used large Keynesian macroeconomic models to prepare macroeconomic forecasts. More recently, VAR models have become a popular alternative. Despite their usefulness in preparing unconditional forecasts, VAR models are unsuitable for policy evaluation. The Keynesian models continue to be used for policy analysis, and suggestions are given for improving the persuasiveness of these results.

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