Growth, Volume 1 : Econometric General Equilibrium Modeling

This volume presents an econometric approach to general equilibrium modelling of the impact of economic policies.

Earlier approaches were based on the "calibration" of general equilibrium models to a single data point.

The obvious disadvantage of calibration is that it requires highly restrictive assumptions about technology and preferences, such as fixed input-output coefficients.

These assumptions are contradicted by the massive evidence of energy conservation in response to higher world energy prices, beginning in 1973.

The econometric approach to general equilibrium modeling successfully freed economic policy analysis from the straight jacket imposed by calibration.As a consequence of changes in energy prices and new environmental policies, a historical experience has accumulated over the past two decades.

Interpreted within the framework of the neoclassical theory of economic growth, this experience provides essential guidelines for future policy formation.