Forecasts from the employment block of a multi-sectoral model of the scottish economy

This paper considers the determination of employment in four Scottish industries. The specifications considered are classified as either Keynesian or neoclassical in nature by reference to the relevant economic theory. The statistical assessment of an estimated equation involves the calculation of a number of diagnostic test statistics which assess, amongst other things, the accuracy of the forecasts produced by the equation. To distinguish between alternative estimated equations we employ non-nested (or separate) test procedures. The results obtained suggest Keynesian type specifications are superior for three of the four industries considered.