Department of Economics University of Maryland, Fifth Edition, January 2008
This is a book about how to build models of a business, an industry, or the whole economy. It
explains techniques used both in simple, single-equation models for forecasting the sales of a single
product of a single company and also in complex, many-equation models of an entire economy or of
the world. The principal example in the first two parts of the book is a macroeconomic model of the
USA. The title, The Craft of Economic Modeling, emphasizes that the book does not stop with the
theory or even with a few examples. Rather, it leads the reader directly into practice, for it is
accompanied by computer software and data that enable the user to apply to practical problems
every technique described. Though some of the exercises are just drills in the techniques, many call
for originality and creativity in handling real-life problems. Of course, as in any craft, a book can
only help, not replace, a living teacher.
