Alternative Estimation Methodologies for Macro Model: ECM vs. OLS

Alternative Estimation Methodologies for Macro Model: ECM vs. OLS

This paper focuses on macroeconometric models and argues that they are a useful tool in analyzing the economy-wide or sector-specific effects of policy measures. Simulations using these models have enabled planners and policymakers to trace through the effects of proposed policy changes or external shocks as well as quantify their impacts. The paper argues that their importance as an aid to planning is well recognised.

The discussion paper compares the Error Correction Model and Ordinary Least Square.

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