SEMAINE D'ETUDE SUR LE ROLE DE L’ANALYSE ECONOMETRIQUE ETC.

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tionship between productivity and research and development,
it is fairly clear that one exists. Further study should show
where the main opportunities lie.

THE METHODS OF ESTIMATION

Like the relationships of the model, the methods of estimation
 go through various stages of development. This is true
both of the initial values and of the parameters. The typical
procedure is to start either with existing estimates or with the
econometric analysis of past observations. The parameters in
both the consumption functions and the input-output relationships
 vary systematically with time, and so the next step is
to calculate their values in 1970. These results are then scrutinised
 with the help of casual empirical knowledge to see how
far they seem sensible, and some adjustments are made. Finally
 they are discussed, whenever possible, with outside experts,
 and further adjustments are made. So far we have not
got much beyond the early stages of this process; in particular.
our main attack on the last stage is only just beginning.
Let me now illustrate this sequence by outlining the methods
of estimation we have used in the order in which they occur
in the calculations.

a) Exogenous final demand.
This category can be divided into five components.

1) Private consumers’ expenditure. Here we began vy
applying the model consisting of (IV. 20), (IV. 21) and (IV. 24),
and a similar model which makes use of quadratic trends, to
eight major groups of expenditure. The parameters were estimated
 from annual data covering the period 1goo-1g60 with
the exception of the years 1914-1919 and 1940-1947. This
was done by means of an iterative, two-stage, least-squares procedure.
 as follows.

11 Stone - pag. 61