Discussion Paper No. 08 of 2001 on Specifying and Estimating Partial Equilibrium Models for Use in Macro Models: a Road Map for the KIPPRA-Treasury Macro Model

Abstract

Formulating research questions and carrying out empirical analysis is not an easy task. It is particularly difficult for practitioners in government ministries, who are bogged down with the day-to-day running of the ministry and have little time left for pursuing the frontier of research. Yet these economists need to use the latest available techniques in their trade so as to arrive at sensible policy analysis. Thus there is a clear gap between practical economists' work and that of academic economists. This paper is an attempt to bridge that gap. It provides the procedure for formulating a research question, shows how to locate the relevant background literature, how to specify the economic and econometric models relevant/or the analysis, and how to write thefi nal research report. It illustrates this procedure by using macroeconomic issues from Kenya. With the aim of reaching a wider audience, it is accompanied by an annex detailing the simplified, relevant basic mathematical and econometric principles employed in the main text. We believe it will serve as a guide for improving the KIPPRA Treasury Macro Model of Kenya and hope that it will serve as a valuable tool for those using the macro model and for training, both now and in the future. The paper may also serve as a guide for researchers in applied macroeconomics at the graduate level of their study.