Project LINK.

• Author: Klein, Lawrence R.

As Ambassador Fonseca suggests in the preceding article, empirical truth can be means to attaining the power to change. The year 1999 marks the thirtieth anniversary of Project LINK, a cooperative venture of more than fifty macroeconomists, many in Government, academia and regional organizations, each of whom runs national or regional econometric models which the Project links together to allow for globally short-term economic forecasting. The United Nations has been involved in the Project since the mid-1990s.

The Chronicle is privileged to present a profile of the Project by Lawrence R. Klein, Nobel Laureate in Economics. Under his direction, the original centre for computing and assembling LINK system information was instituted at the University of Pennsylvania, where he is Emeritus Professor.

Immediately after the Second World War, it was not surprising that the major country to lead world economic recovery was the United States, where there was little physical damage, although much loss in human terms. In these circumstances, the United States dollar became the currency of choice, and the concept of "dollar shortage" played an important role in international economic thinking. Within 20 to 25 years, however, the "dollar shortage" turned into the "dollar glut", and the institutional structure that gave rise to the International Monetary Fund (IMF) at Bretton Woods (New Hampshire) had to be revised from fixed but changeable currency parities to floating rates that fluctuated a great deal in ways that the Bretton Woods participants had not anticipated.

Significant interest arose among economists in analyzing the transmission mechanism by which such changes in currency values and in other economic disturbances translated into wider ranging economic effects from the United States and other relatively strong economies to relatively weaker economies.

During the latter part of the 1960s, there were many advances in macroeconometric model-building, starting from modelling of advanced industrial economies to a few developing ones. The databases and electronic computing facilities were rapidly being developed, enabling progress to be made in the degrees of detail and sophistication that could be put into the statistical model-building effort. The Committee on Economic Stability and Growth of the Social Science Research Council had already supported collective efforts in United States model-building, and it was decided in a 1968 Committee meeting...