ʽModernʼ Macroeconometrics: statistical alchemy at the final stage

Samuel Meng, University of New England

Despite having faced a battery of criticisms, macroeconometrics has arisen and dominated for more than half a century. By examining the foundations of macroeconometrics, this paper demonstrates that the conditions for the probability theory do not hold in time-series modelling and thus all macroeconometric modelling work is baseless. The paper further shows that random experiment, random variable and random disturbance are a trinity, and that macroeconometrians have broken this trinity, detached the probability theory from its evidence, and thus embedded severe problems into their practice. The paper also discusses the detrimental impact of macroeconometric modelling and suggests a scientific way to conduct research in macroeconomics.