Conceptual Analysis and Fieldwork in Macroeconometric Methodology: Modeling Unemployment, Inflation and Production

Abstract

The recent failure of commonly accepted, inductive, econometric models to provide insights into real, macroeconomic phenomenon during economic crises has provoked a debate concerning contemporary econometric methodology. Based on the foundations laid by Haavelmo, and Hollis and Nell, an assessment of Edward J. Nell’s (1998) “unifying methodological framework” (UMF) is offered. Nell’s UMF places socioeconomic institutions and interdependencies, and technological realities as basis of analysis. Using “conceptual analysis” and “fieldwork” Nell presents an alternative to generally accepted, mainstream, econometric methodology. The purpose of this paper is to look at some examples of the way, and this can help develop useful theory and improve macroeconometric model building. Applying Nell’s UMF to unemployment, inflation, and production reveals a methodological advance that promises more realistic insights into macroeconomic phenomena than is offered by contemporary, mainstream, econometric models.