Macroeconometric models, in many ways the flagships of the economist's profession in the 1960s, came under increasing attack from both theoretical economist and practitioners in the late 1970s. Critics referred to their lack of microeconomic theoretical foundations, ad hoc models of expectations, lack of identification, neglect of dynamics and non-stationarity, and poor forecasting properties. By the start of the 1990s, the status of macroeconometric models had declined markedly, and had fallen completely out of and with academic economics. Nevertheless, unlike the dinosaurs to which they often have been likened, macroeconometric models have never completely disappeared from the scene. This book describes how and why the discipline of macroeconometric modelling continues to play a role for economic policymaking by adapting to changing demands, in response, for instance, to new policy regimes like inflation targeting. Model builders have adopted new insights from economic theory and taken advantage of the methodological and conceptual advances within time series econometrics over the last twenty years. The modelling of wages and prices takes a central part in the book as the authors interpret and evaluate the last forty years of international research experience in the light of the Norwegian 'main course' model of inflation in a small open economy. The preferred model is a dynamic model of incomplete competition, which is evaluated against alternatives as diverse as the Phillips curve, Nickell-Layard wage curves, the New Keynesian Phillips curve, and monetary inflation models on data from the Euro area, the UK, and Norway. The wage price core model is built into a small econometric model for Norway to analyse the transmission mechanism and to evaluate monetary policy rules. The final chapter explores the main sources of forecast failure likely to occur in a practical modelling situation, using the large-scale nodel RIMINI and the inflation models of earlier chapters as case studies.
Author(s): Gunnar Bårdsen, Øyvind Eitrheim, Eilev S. Jansen, Ragnar Nymoen
Series: Advanced Texts in Econometrics
Publisher: Oxford University Press, USA
Year: 2005
Language: English
Pages: 361
Tags: Финансово-экономические дисциплины;Эконометрика;
Contents......Page 10
List of Figures......Page 16
List of Tables......Page 20
List of Abbreviations......Page 22
1.1 The case for macroeconometric models......Page 24
1.2 Methodological issues (Chapter 2)......Page 27
1.3 The supply-side and wage- and price-setting (Chapters 3–8)......Page 30
1.4 The transmission mechanism (Chapters 9 and 10)......Page 34
1.5 Forecast properties (Chapter 11)......Page 38
2.1 Introduction: small vs. large models......Page 40
2.2.1 The influx of statistics into economics......Page 43
2.2.2 Role of economic theory in macroeconometrics......Page 45
2.3.1 The theory of reduction......Page 47
2.3.2 Congruence......Page 49
2.4 An example: modelling the household sector......Page 52
2.4.1 The aggregate consumption function......Page 53
2.4.2 Rival models......Page 54
2.5 Is modelling subsystems and combining them to a global model a viable procedure?......Page 55
3.1 Introduction......Page 58
3.2 Cointegration......Page 60
3.2.1 Causality......Page 64
3.2.3 Early empiricism......Page 65
3.2.4 Summary......Page 66
4.1 Introduction......Page 68
4.1.1 Lineages of the Phillips curve......Page 69
4.2 Cointegration, causality, and the Phillips curve natural rate......Page 70
4.3 Is the Phillips curve consistent with persistent changes in unemployment?......Page 75
4.4 Estimating the uncertainty of the Phillips curve NAIRU......Page 77
4.5.1 Inversion......Page 79
4.5.2 Lucas critique......Page 80
4.5.3 Model-based vs. data-based expectations......Page 82
4.5.4 Testing the Lucas critique......Page 84
4.6 An empirical open economy Phillips curve system......Page 85
4.6.1 Summary......Page 95
5.1 Introduction......Page 96
5.2 Wage bargaining and monopolistic competition......Page 97
5.3 The wage curve NAIRU......Page 101
5.4 Cointegration and identification......Page 102
5.5 Cointegration and Norwegian manufacturing wages......Page 105
5.6 Aggregate wages and prices: UK quarterly data......Page 109
5.7 Summary......Page 110
6.1 Introduction......Page 112
6.2 Nominal rigidity and equilibrium correction......Page 113
6.3 Stability and steady state......Page 115
6.4 The stable solution of the conditional wage–price system......Page 118
6.4.1 Cointegration, long-run multipliers, and the steady state......Page 120
6.4.2 Nominal rigidity despite dynamic homogeneity......Page 121
6.4.3 An important unstable solution: the ‘no wedge’ case......Page 122
6.4.4 A main-course interpretation......Page 123
6.5 Comparison with the wage-curve NAIRU......Page 125
6.6 Comparison with the wage Phillips curve NAIRU......Page 127
6.7.1 Empirical wage equations......Page 128
6.7.2 Aggregate wage–price dynamics in the United Kingdom......Page 130
6.8 Econometric evaluation of Nordic structural employment estimates......Page 131
6.8.1 The NAWRU......Page 132
6.8.2 Do NAWRU fluctuations match up with structural changes in wage formation?......Page 134
6.8.3 Summary of time varying NAIRUs in the Nordic countries......Page 139
6.9.1 A complete system......Page 140
6.9.2 Wage–price dynamics: Norwegian manufacturing......Page 142
6.10 Summary......Page 146
7.1 Introduction......Page 150
7.2 The NPCM defined......Page 152
7.3 NPCM as a system......Page 153
7.4 Sensitivity analysis......Page 157
7.5.1 An encompassing representation......Page 159
7.5.2 Testing against richer dynamics......Page 160
7.5.3 Evaluation of the system......Page 162
7.5.4 Testing the encompassing implications......Page 164
7.5.5 The NPCM in Norway......Page 167
7.6 Conclusions......Page 168
8.1 Introduction......Page 170
8.2.1 The velocity of circulation......Page 171
8.2.3 Inverted money demand equations......Page 173
8.3.1 Money demand in the Euro area 1980–97......Page 174
8.3.2 Inversion may lead to forecast failure......Page 175
8.4.1 Money demand in Norway—revised and extended data......Page 178
8.4.2 Monetary effects in the inflation equation?......Page 182
8.5 Inflation models for the Euro area......Page 184
8.5.1 The wage–price block of the Area Wide Model......Page 185
8.5.3 The New Keynesian Phillips Curve Model......Page 186
8.5.4 The P*-model of inflation......Page 187
8.6.1 The reduced form AWM inflation equation......Page 189
8.6.2 The reduced form ICM inflation equation......Page 190
8.6.3 The P*-model......Page 192
8.6.4 The New Keynesian Phillips curve......Page 197
8.6.5 Evaluation of the inflation models’ properties......Page 198
8.6.6 Comparing the forecasting properties of the models......Page 201
8.6.7 Summary of findings—Euro-area data......Page 204
8.7.1 The Incomplete Competition Model......Page 205
8.7.2 The New Keynesian Phillips curve......Page 206
8.7.3 Inflation equations derived from the P*-model......Page 208
8.7.4 Testing for neglected monetary effects on inflation......Page 211
8.7.5 Evaluation of inflation models’ properties......Page 213
8.7.6 Comparing the forecasting properties of the models......Page 215
8.7.7 Summary of the findings—Norway vs. Euro area......Page 219
9.1 Introduction......Page 222
9.2.1 Modelling the steady state......Page 225
9.2.2 The dynamic wage–price model......Page 227
9.3.1 The nominal exchange rate v[sub(t)]......Page 230
9.3.3 Unemployment u[sub(t)]......Page 233
9.3.4 Productivity a[sub(t)]......Page 234
9.3.5 Credit expansion cr[sub(t)]......Page 235
9.3.6 Interest rates for government bonds RBO[sub(t)] and bank loans RL[sub(t)]......Page 236
9.4 Testing exogeneity and invariance......Page 237
9.5 Model performance......Page 239
9.6 Responses to a permanent shift in interest rates......Page 243
9.7 Conclusions......Page 245
10.1 Introduction......Page 248
10.2 Four groups of interest rate rules......Page 250
10.2.1 Revisions of output data: a case for real-time variables?......Page 252
10.2.3 Ex post calculated interest rate rules......Page 253
10.3.1 A new measure—RMSTEs......Page 254
10.3.2 RMSTEs and their decomposition......Page 255
10.3.3 Relative loss calculations......Page 260
10.3.4 Welfare losses evaluated by response surface estimation......Page 263
10.4 Conclusions......Page 266
11.1 Introduction......Page 268
11.2 EqCMs vs. dVARs in macroeconometric forecasting......Page 272
11.2.1 Forecast errors of bivariate EqCMs and dVARs......Page 273
11.2.2 A large-scale EqCM model and four dVAR type forecasting systems based on differenced data......Page 282
11.3 Model specification and forecast accuracy......Page 290
11.3.1 Forecast errors of stylised inflation models......Page 291
11.3.2 Revisiting empirical models of Norwegian inflation......Page 296
11.3.3 Forecast comparisons......Page 299
11.4 Summary and conclusions......Page 302
A.1 The Lucas critique......Page 304
A.2.1 Repeated substitution......Page 305
A.2.2 Undetermined coefficients......Page 308
A.2.3 Factorization......Page 311
A.2.4 Estimation......Page 313
A.3 Calculation of interim multipliers in a linear dynamic model: a general exposition......Page 315
A.3.1 An example......Page 318
Bibliography......Page 326
B......Page 350
H......Page 351
M......Page 352
S......Page 353
Y......Page 354
D......Page 356
F......Page 357
L......Page 358
N......Page 359
R......Page 360
W......Page 361
