ABSTRACT
Most institutions that conduct both policy analysis and forecasting have traditionally used the same model for these two activities. This chapter suggests that serious conflicts may arise between forecasting and policy analysis in the development of these macroeconometric models. The suggested solution to this problem is to use separate models for forecasting and policy analysis, and the chapter discusses some of the issues that might arise from such a ‘division of labour’. Recent developments in multi-country modelling and in the Bank of England suggest that this process may be currently underway.
