MA/US is the cornerstone of all our modeling efforts at MA. From the start, MA’s theoretically based and empirically calibrated model of the U.S. economy was quickly recognized as the best model in the private sector. We have worked to keep it that way.
MA/US is grounded in theory and estimated with modern econometric methods. The consumption modeling is based on the well-established life cycle model. Our equations for business fixed investment are based on neoclassical models of capital spending. All of the equations for spending on durable goods (business capital, houses, and other durables), in line with neoclassical theory, have their own measures of cost of capital, tailored to the specific durable good. Our modeling of the financial sector reflects modern financial theory and the role of forward-looking expectations. We model the policy decisions of the FOMC using estimated specifications of Taylor-like policy rules. Our modeling of the demand for housing and of labor force participation is driven in part by careful use of demographic factors. Our model of short-run inflation dynamics is a modern version of the Phillips curve with forward-looking expectations.