This book is aimed at a variety of readers includ- ing students on Business and Economics courses at the intermediate level and also for those on an MBA course as a basic macroeconomics text. As the title suggests the text incorporates discussions on the nature of business cycles, basic macroeco- nomic theory and forecasting. There is also a short section on macroeconomic policy. The book is structured as follows: part 1 (5 chapters) Intro- duction to Business Fluctuations; part 2 (7 chap- ters) National Income Analysis; part 3 (2 chap- ters) Business Cycle Theories; part 4 (6 chapters) Forecasting Economic Activity; part 5 (2 chap- ters) Proposals for Achieving Economic Growth and Stability. The structure of the text illustrates the emphasis the authors have given to providing linkages between theory and forecasting activity.

Part 1 provides a general introduction to busi- ness fluctuations including an historical record of business cycles in the United States. This particu- lar section (Chapter 2) could have been made more user-friendly through the incorporation of time series graphs for the main series discussed.

Part 2 together with part 3 provide the main theoretical underpinnings of the text. The reader is given an adequate tour through theories pro- vided by the Classical Keynesian and Monetarist schools both in terms of comparative static and dynamic analysis. The static analysis extends to aggregate demand and supply analysis following on from the development of the traditional IS/LM paradigm. Dynamic analysis incorporates a brief discussion of Harrod/Domar growth the- ory and a more fuller discussion of Business Cycle theory. A minor criticism of this section is that some of the topics tend to be dealt with superficially. For example, the role of money and/or finance in the determination of national income deserves fuller treatment. This is also true of the rational expectations hypothesis. In mitigation of this point each chapter concludes with an excellent list of readings which point the interested reader in the right direction.

Part 4 is concerned with forecasting. A num- ber of methods are discussed involved in the forecasting of trends (linear and non-linear) and short-term macroeconomic activity. A useful con- sideration of leading indicators and diffusion in- dices appears here. There is also a discussion on the procedures for developing an expenditure model of gross national product. The final chap-

ter in this part deals with forecasting sales both at the industry and firm level. Perhaps more atten- tion should have been given in this section to the role of macro-econometric models as this pro- vides a valuable link with the theory developed in parts 2 and 3. Similarly greater discussion could have been devoted towards the evaluation of dif- ferent forecasts.

The role of policy is the subject of part 5. The nature of the various policy objectives are dis- cussed together with the main policy instruments against the background of US institutional ar- rangements.

There is a danger that a book with such a wide coverage will fail to provide adequate discussion of some or all of the main subject areas. In general this text avoids this potential danger, although it is easy to criticise the omission of a number of topics such as those noted above. These are, however, fairly minor and do not significantly detract from the essential value of a good text which commendably links the practical problem of forecasting to the relevant economic theory. The value of this text is evidenced by the fact that it is now in its eighth addition.

J.L. Thompson The Lil!erpool Business School

Lillerpool Polytechnic, UK

K. Holden, D.A. Peel and J.L. Thompson, Eco- nomic Forecusting: An Introduction (Cambridge University Press, Cambridge, UK, 1991) 1SBN OS21 356121, 0521 35692x. h/b f30.00, $44.5; p/b f10.95, $16.95.

This is an interesting little book which maintains the standards of earlier work by the same au- thors. It will be especially useful as reading mate- rial for graduate and final year undergraduate students. The text is concise and comprehensive, yet there is a nice balance of technical material and discussion, algebra and text, theory and ap- plication. If at times the exposition is a little thin, this is offset with copious references to the aca-

Book reaiews 389

demic literature from which many examples are drawn. Above all, the book is an easy read.

The text begins with a comprehensive intro- duction which should not be ignored as it gives a broad overview of forecasting techniques and re- views some of the technical background. Certain parts of this book will be hard going for those without a knowledge of basic econometrics and this is particularly true of the second chapter which covers time-series methods. This includes a succint but orthodox text-book exposition of Box-Jenkins methodology which is followed by a discussion of vector autoregression models and cointegration. Overall this chapter is probably not sufficiently thorough for those meeting the topics for the first time - particularly the material on cointegration and stationarity - but may provide useful discussion for those already initiated.

The third chapter is a short but interesting digression on how and whether forecasts can be improved by pooling the results from a variety of methods. The content is essentially a literature survey and is an active research area of two of the authors yet it is rather inconclusive. Although useful in itself, I found that this chapter in- terupted the flow of the book and would have been better placed near the end.

I imagine that most students will be guided straight to chapters 4, 5 and 6 which cover mi- croeconomic forecasting, macroeconomic models and asset market prices. In each case we have an easy-to-read guide to forecasting techniques and practise with examples and evidence drawn from the literature. These chapters will give the unfa- miliar reader many valuable insights into the dif- ficulties and rewards of forecasting and will offer a context for many of the methods discussed.

The chapter on microeconomic forecasting covers demand/sales/market share forecasting; anticipations data and leading indicators; and scenario analysis. As in the following chapters, this material will be of general interest to those contemplating careers as professional economists in industry or commerce and those simply wishing to be economically literate business-persons.

Chapter 5 on forecasting with macroeconomic models gives only the briefest of introductions to the models themselves and concentrates on fore- casting practise and the assessment of macroeco- nomic forecasting performance. The highly rele- vant examples include T. Barker’s analysis of

forecasts prior to the 1980/82 recession; the Warwick Macroeconomic Modelling Bureau’s de- composition of forecast errors; and McNees’ study of forecast accuracy in the U.S..

Finally, the chapter on forecasting asset mar- ket prices introduces basic material, such as the efficient markets hypothesis, and discusses for- eign exchange markets, stock markets and com- modity prices; with a rather brief mention for the capital asset pricing model.

Each of these three chapters is rather short for a formal course on the subjects concerned. At the same time it will be good background reading for general courses in econometrics/ applied econo- metrics - introducing a wide range of topics in an easily digestible form. It may also be appreciated by economists more widely who have not previ- ously been involved in forecasting. The list of some 290 references will be valuable for those wishing to dig deeper into the subject matter. Overall my impresssion is of a slightly idiosyn- cratic choice of material, which nevertheless com- bines into a useful text-book which should appear on many a reading list over the next few years.

Paul Fisher

Bank qf England, UK

William W.S. Wei, Time Series Analysis, Unillari- ate and Multicariate Methods, (Addison-Wesley, Reading, MA, 1990).

The layout of this book is very similar to Box and Jenkins (1976) classical book in the time series analysis. This is a textbook designed for a one-year course in the graduate program for students with backgrounds in statistical theory and regression analysis. It can also be used as an advanced undergraduate time series analysis book. The book covers both time-domain and frequency-do- main analyses of univariate as well as multivariate time series. In addition to the basic time series methods, many recent advanced approaches in model identification, estimation, and forecasting are presented with many references.