ABSTRACT
This chapter examines the overall tracking performance of the Iraqi model and focuses on the tracking ability of the model. The ‘control’ or ‘base’ solution of the Iraqi model is obtained by solving the values of all endogenous variables for the given values of exogenous and lagged endogenous variables. The dynamic characteristics of the equation system are fully incorporated into the solution by using the system solutions for the earlier periods whenever lagged endogenous variables are encountered. However, one of the important requirements of a dynamic econometric model that purports to show the impact of macroeconomics variables relates to its tracking ability. In general, a good model should be able to track or predict the movements of the endogenous variables reasonably well, that is, within an acceptable margin of error. The tracking performance of the model is assessed by comparing the ‘model solution’ with the actual historical values for the most important variables in the model.
