BAYESIAN MODELING OF ECONOMIES AND DATA REQUIREMENTS

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Abstract
Marshallian demand, supply and entry models are employed using data, 1949-1979, for eleven sectors of the U.S. economy to produce annual out- put forecasts that are summed over the sectors to provide annual forecasts of real GDP and its growth rates, 1980-1997. Such "disaggregate" forecasts are compared to forecasts derived from several models implemented with aggregate data. The empirical evidence indicates that it pays to disaggregate. Bayesian and non-Bayesian estimation and forecasting procedures are discussed and applied in analyzing the sector and aggregate data. Also, it is noted that if the sector models are augmented with models for labor, capital, money and bond markets, the result is a new Marshallian macroeconomic model.

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