This book presents an econometric modelling approach to analyzing macroeconomic disequilibria, focusing on the market for goods and labour and the spillovers between these markets transmitted through the decisions of companies during the production cycle. The macroeconomic markets are treated as heterogeneous aggregates, consisting of a multitute of micro-markets on which demand/supply ratios differ. Disequilibrium models have been criticized because they ignore the fact that inventories enable firms to smooth production over any particular cycle. The author argues that buffer stocks (output inventories, unfilled orders) should be accounted for within the disequilibrium framework, giving rise to a dynamic modification rather than a fundamental invalidation of rationing and spillover effects. The model developed in this book combines traditional Keynesian-type analysis with supply-side considerations and at the same time allows for micro-level imbalance. The resulting econometric structure is inherently nonlinear, reflecting the view that the response of economic activity to demand-side and supply-side factors varies over the cycle, depending on the aggregate mix of regimes.
The model detailed in this study has been estimated with quarterly data for Switzerland. Various simulation experiments demonstrate the potential of this type of model for empirical business-cycle analysis and policy discussions. This monograph on econometrics and macroeconomics is intended for researchers.
1. Introduction.- 1.1 Alternative theories of macroeconomic fluctuations.- 1.2 Assessment of the controversy - Motivation of the present study.- 1.3 Scope and limitations of the investigation.- 1.4 Set-up of the paper.- 2. The Micro Model.- 2.1 Spillovers and transactions.- 2.2 Discussion of the spillover elasticities.- 2.3 Regimes.- Appendix: Comparision with other spillover-formulations.- 3. Derivation of the Aggregate Model.- 3.1 Aggregation.- 3.2 Introduction of error terms.- 3.3 Adopting an econometrically tractable approximation.- 3.4 Accuracy of the approximation.- 4. Modified Version: Buffer Role of Inventories and Unfilled Orders.- 5. Specification of the Aggregate Econometric Equations.- 5.1 Labor supply.- 5.2 Demand for domestic output.- 5.3 Notional labor demand, notional goods supply and investment.- 5.3.1 Preliminaries.- 5.3.2 Malinvaud's investment model.- 5.3.3 Adopting a vintage-approach.- 5.3.4 Scrapping of old equipment.- 6. Structure of the Model, Method of Estimation and Dynamic Ncxtensions.- 6.1 Allowing for a trend in labor market mismatch.- 6.2 Summary of the model.- 6.3 Method of estimation.- 6.4 Labor hoarding, partial adjustment and error correction dynamics.- 7. Estimation results.- 7.1 Empirical versions - Models 1 to 4.- 7.2 Model 1: No buffer stocks, 'static' labor hoarding.- 7.3 Model 2: No buffer stocks, dynamic labor hoarding.- 7.4 Model 3: Allowing for buffer stocks.- 7.5 Model 4: Inclusion of the investment equation.- 7.6 Interpreting Model 4 - Testing a priori parameter restrictions.- 7.7 Intertemporal substitution in labor supply - Comparison with other studies.- 8. Testing Parameter Stability.- 9. Simulations.- 9.1 Fit of the model (static simulation).- 9.2 Development of the Swiss economy: Regimes and spillovers.- 9.3 The Swiss labor market - A miracle?.- 9.4 Dynamic tracking performance.- 9.5 Simulating short-run and long-run effects of autonomous changes, assessing dynamic stability.- 9.5.1 Short-term impact of a demand shock (Keynesian demand stimulation).- 9.5.2 Reference simulation for examining long-run effects.- 9.5.3 Checking for dynamic stability.- 9.5.4 Long-run effects of permanent and single-period demand shocks.- 9.5.5 Simulation of a permanent wage (and price) reduction.- 10. Summary and Conclusions.- References.
Series: Lecture Notes in Economic and Mathematical Systems
Number Of Pages: 193
Publisher: Springer-Verlag Berlin and Heidelberg Gmbh & Co. Kg
Country of Publication: DE
Dimensions (cm): 24.41 x 16.99
Weight (kg): 0.34