The Econometric Model

  • Dipak R. Basu


The aim of this chapter is to formulate and test a large-scale, multisectoral, econometric model for the UK in order to apply the results of the stochastic optimal control techniques developed earlier. Our final purpose is to formulate an investment plan for the UK economy, together with a price- wage plan to regulate the economy. The purpose of the model should determine its basic structure. Therefore, because it is intended for a planned economy, the structure should not reflect an aggregative, Keynesian, expenditure-type model, where the major emphasis is on the financial and expenditure aspects of the economy. In order for the plan to be meaningful, the model should be multisectoral. Again, as our purpose is to apply a control technique to solve the energy problem, the major emphasis must be on the energy sector of the economy. It is also desirable that the model have a dynamic structure that is reasonably non-controversial, i.e. that falls into line with either Keynesian or post-Keynesian theory. We have adopted a structure which is not Keynesian, for the reason noted above, but which represents a world where major emphasis is on the real sector of the economy. Our main purpose is physical planning, thus, except for prices and wages, we have ignored the monetary and fiscal aspects of planning. To set the monetary and fiscal instruments to attain the physical plan is a research task in itself, and beyond the scope of our present study.


Production Function Econometric Model Factor Demand Nuclear Fuel Cycle Fast Breeder Reactor 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Avenhaus, R., W. Hafale and P. McGrath, ‘Considerations on the large scale deployment of the nuclear fuel cycle’, IIASA Research report no. RR-75-36, International Institute of Applied Systems Analysis, Laxenburg, 1975.Google Scholar
  2. Ball, R. J. and T. Burns, ‘An interim report on a quarterly statistical model of the UK economy’, in Hilton and Heathfield (1973).Google Scholar
  3. Byron, R. P., ‘Initial Attempts in Econometric Model Building in NIESR’, in Hilton and Heathfield (1973).Google Scholar
  4. Cochrane, D. and G. H. Orcutt, ‘Application of least squares regressions to relationships containing autocorrelated error terms’, Journal of the American Statistical Association, March 1949.Google Scholar
  5. Chow, G, Analysis and Control of Dynamic Economic Systems, (New York: Wiley, 1976).Google Scholar
  6. Griliches, Z., ‘Distributed lags: A survey’, Econometrica, vol. 35, January 1967.Google Scholar
  7. Hafale, W. and A. S. Manne, ‘Strategies for a transition from fossil to nuclear fuels’, IIASA Research report no. RR-74-7, International Institue of Applied Systems Analysis, Laxenburg, 1974.Google Scholar
  8. Hubbert, M. King, ‘Energy resources: a report to the National Academy of Science Committee on National Resource’, National Research council Pub.1000-D, 1962.Google Scholar
  9. Hilton, K. and D. Heathfield (eds), The Econometric Study of the UK, (London, 1973).Google Scholar
  10. Klein, L. R., Economic Fluctuations in the United States, 1921–1941, (New York: Wiley, 1950).Google Scholar
  11. Klein, L. R. and A. S. Goldberger, An Econometric Model of the United States, 1929–1952, (North-Holland, 1955).Google Scholar
  12. Kmenta, J., Elements of Econometrics, (London: Macmillan, 1971).MATHGoogle Scholar
  13. Kuh, E., ‘Measurements of Potential Output’, American Economic Review, September 1966.Google Scholar
  14. Kuh, E., ‘A Productivity Theory of Wage-Levels: an Alternative to the Phillips Curve’, Review of Economic Studies, October 1967.Google Scholar
  15. Liew, C. K., ‘Inequality constrained least-squares estimation’, Journal of the American Statistical Association, September 1976Google Scholar
  16. Marten, A. and R. Pindyck, ‘An application of optimal control to investment allocation for development planning’, in Proceedings of the 1972 IEEE Conference on Decision and Control.Google Scholar
  17. Pindyck, R. S., ‘An application of the linear-quadratic tracking problem to economic stabilization policy’, IEEE Transactions on Automatic Control, June 1972.Google Scholar
  18. Prime, H. A., Modern Concepts in Control Theory, (New York: McGraw-Hill, 1971).Google Scholar
  19. Simon, H. A., ‘Dynamic programming under uncertainty with a quadratic criterion function’, Econometrica, vol. 24, no. 1, 1956.Google Scholar
  20. Sowerbutts, A., ‘The DEA medium-term macroeconomic model’, in Hilton and Heathfield (1973).Google Scholar
  21. Theil, H., Optimal Decision Rules for Government and Industry, (North-Holland, 1964).MATHGoogle Scholar
  22. Wonham, W. M., ‘On the separation theorem of stochastic control’, SIAM Journal of Control, VI, May 1968.Google Scholar
  23. Wonham, W. M., ‘Optimal stochastic control’, Automatica, V, January, 1969.Google Scholar

Copyright information

© Dipak R. Basu 1981

Authors and Affiliations

  • Dipak R. Basu

There are no affiliations available

Personalised recommendations