Do Euro Area Forecasters (Still) Have Faith In Macroeconomic Building Blocks?

Date Added: Oct 2009
Format: PDF

Since the early beginning of the financial and economic crisis in 2007, economists began to raise concerns about the usefulness of macroeconomic building blocks, because none of them had predicted the extent or even the occurrence of the financial and economic crisis of 2007-2009. In fact, it became conventional to blame macroeconomists for not anticipating such drastic events and it seems that even macroeconomists themselves lost faith in macroeconomic building blocks. As a consequence, some research institutes began to discontinue forecasting important macroeconomic variables in their large macroeconomic models.