The use of such macroeconomic models could
enhance technical aspects of macroeconomic
management of African economies and could enrich
discussions on policy options and future actions. In
particular, an application of calibration and stress
tests could inform various simulated scenarios; help
to apply empirical information, for example, on
project rates of return; and allow more systematic
risk assessments. The models provide a useful toolkit
for making informed decisions on different policy
options, limited by the particular construct and
assumptions of the models.
Models can be useful — when used intelligently
and with caution
We should of course be mindful of mechanically
applying calibration/simulation results from
macroeconomic models. For example, if productive
investment can indeed bring about a major shift in
economic structure, spillovers and social returns ina short period (as in East Asia), predictions made
on historical data may not be so useful. Hence an
interpretation of calibrated results for fiscal and
debt sustainability 20–25 years from now should be
made with this in mind. Good judgement backed up
by detailed country-specific knowledge is required:
models are only guides to the route — they are not
the route itself.48,49
More generally, the increasing sophistication of
models and calibration techniques cannot replace