History of the Treasury Model

Although econometric equations were used by the Treasury as far back as the late 1950s, it was during the 1970s that these equations were first linked together to form a macroeconomic model. This original model was large for the time - some 200 variables, but improvements in computing power and the need and desire to provide more detail saw rapid further expansion in the following years.

Eventually the model became unwieldy and the large size made its properties harder to gauge. In 1989 the process of slimming down the model commenced and the number of variables was reduced from 1275 to 530. However many parts of the model were merely retained and used outside the core system. The pruning of the model has continued and there are now just 357 variables. Of these, more than 250 are determined within the model but of these many are simple accounting relationships necessitated by the large amount of detail that the Treasury is providing when answering policy questions. Currently, there are only about 30 genuine behavioural equations, making it comparable or smaller in size than the other main UK models.

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