Economic models enjoy growing use and importance. An environment characterized by rapid change and the interplay of a host of variables prompts increased use of and reliance on models. For example, one might want to predict the effect of a change in interest rates on housing starts. On the other hand, a company might desire to predict demand levels for specific building products given reported housing starts. Others may have an interest in a better understanding of how humans behave in response to a change in variables in the environment. The first paper in a two paper series, provides a perspective and guidelines useful to the professional who may have to make decisions about economic models such as the usefulness of models, the important issues to consider when developing a model, the appropriateness of an existing model and interpretation of model output. Provides guidelines for the development and use of models.
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