A Survey of Econometric Model-Building in East and Southeast Asia

Abstract

Econometric models are very widely used not only in the developed industrial countries but also in many developing countries all over the world. In Asian developing countries some models were already constructed in the early 60’s, and since then, construction and practical application of econometric models have steadily increased in many countries. But most of them have not adequately reflected such special characteristics of developing economies in Asia as L. R. Klein observed in his 1965 article: “What kind of Macroeconometric Model in Developing Economies,” Econometric Annual of the Indian Economic Journal:

• 1) limitations of output capacity rather than the shortage of effective demand

• 2) juxtaposition of existing investment opportunities and non-existence of well-organized capital market and hence the importance of inflow of foreign capital and direct investment

• 3) the important role of government economic policies

• 4) the importance of environmental factors like climate or political disturbances on the economic activities

• 5) the significant influence of foreign trade sector and the economic cooperation from international agencies and developed countries.