Working Paper
December 1997
WP 97-20 – Broadly defined, macroeconomic forecasting is alive and well. Nonstructural forecasting, which is based largely on reduced-form correlations, has always been well and continues to improve.
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Structural forecasting, which aligns itself with economic theory and, hence, rises and falls with theory, receded following the decline of Keynesian theory. In recent years, however, powerful new dynamic stochastic general equilibrium theory has been developed, and structural macroeconomic forecasting is poised for resurgence.