ABSTRACT
The dynamic, macro-economic model of the United Kingdom economy presented here is essentially based on the Treasury Model and may be regarded as a shortened and compressed version of that model. The parameters and time lags in the model are not estimated econometrically, and so we do not report standard errors or other statistical measures. They are instead derived directly or indirectly (e.g. by aggregation) from those used in the Treasury Model, except in those few cases that are noted in the following description. *
The model has been used for the purpose of rerunning history in a manner described in Chapters VII and VIII. For this purpose more detail was required of the incomes and expenditures of the different economic sectors than could have been obtained with a truly small econometric model which we could have estimated ourselves. On the other hand, the plethora of detail made available by the full Treasury Model with its 700-plus equations would have also thwarted our exercise: to construct a Base Run back to 1972, revise it in the manner described in Chapter VII, and simulate a rerun of history for thirteen years would have proved an impossible task. That is why we have adopted the somewhat unusual procedure of creating by hand the small model described here from the large Treasury Model.t A bonus is that the small size of the present model. aids an understanding of the basic dynamic relationships that underly its performance and that determine the outcomes described in Chapters VII and VIII.
