Summary of the Article “Macroeconomics and Reality” is an article written by Christopher Sims and published in the Econometrica journal in 1980. In the article, Sims begins by stating clearly that there is a difference between economic theory and reality. In many cases, what is proposed by theories is not exactly what we see in real-life situations. He further states that statistical models should be valuable in reconciling the theories to the reality. He however points out that few statistical economic models are utilized within the context of the large macroeconomic models. Sims’ article is thus aimed at explaining this quagmire and offering suggestions on how it can be solved. The aim of this paper is to critically analyze Sims’ article. One of the issues raised by Sims (1) is the problem related to one-equation-at-a-time specification of a large model. It is true that the demand or supply of any commodity is influenced by an array of factors. Consider for instance the demand for cars in a country. This demand is affected by the price of the car, the price of other models of cars, tastes and preferences of consumers among others. Thus, a large macroeconomic model will constitute all these variables some of which are endogenously determined while others are exogenously determined. The one-equation-at-a-time specification will however consider the influence of each of the variables on the demand separately thus leading to a set of demand functions. When this happens, problem arises from the placement of the variables on either side of the equation. Sims states that, “… any variable which appears on the right hand side of one of these equations belongs in principle on the right hand side of all of them,” (3). Sims (1980) also raises the concept of dynamism of large macroeconomic models. Dynamic models assert that changes in one variable will bring about changes in other variables of the model. Thus, the market will not be in equilibrium. Sims (3) however states that the concept of dynamic models does not present any problem as long as the condition that markets clear is not violated. After analyzing the conventional processes followed in identification of economic modeling, Sims (4) argued that the restrictions that originate from economic theory which are imposed on structural models are incredible and therefore cannot be taken seriously. These restrictions are required for the achievement of identification. Sims disagreed with the arbitrary normalizations which take place when an equation is claimed to offer an explanation of the many endogenous variables it contains. He also criticized the one-equation-at-a-time specification process of macroeconomic models in which restrictions which are suitable for partial equilibrium models are imposed, thus bringing about unattractive systems properties. In situations where equations are dynamic, the identification process is more complex. Likewise, policy variables are often assumed to be externally determined but in real-life situations they are usually partly endogenous. Sims (5) therefore claimed that only strictly exogenous variables can aid the identification process, and thus many apparently identified models are not in f