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Analyzing a Small French ECM Model

  • Jean-Louis Brillet
Part of the Advances in Computational Economics book series (AICE, volume 6)

Abstract

We have used the structure of a preexisting small model of the French economy, and adapted it to an ECM format. The new model should
  • present more explicit formulations

  • have better stabilized properties

  • separate the long term formulation and the short term dynamics

  • give results easier to interpret

  • but still be usable for policy analysis.

We start by presenting the properties of the standard model. Then we apply in sequence an ECM format to all econometric equations. This process allows us to introduce interesting improvements, going beyond the scope of this particular model.

We simulate the model over a very long period, observing the existence and specificity of the numerical convergence to a steady state grow path. We analyze the response of the model to shocks, both in the short and long term, associating it to the ECM specifications.

We then build the long term model, analyzing its logical structure, and check the identity of its properties to the normal version. Finally, we analyze the eigenvalues of the linearized dynamic process, associating them to individual dynamics.

Keywords

Error Correction Model Demand Shock Productive Investment Saving Ratio Term Simulation 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

  1. 1.
    Brillet J.-L., Le modèle MicroDMS, INSEE Méthodes No. 44, juin 1994.Google Scholar
  2. 2.
    The notion of “desired value” must be taken here in a wide sense. It can represent actually a long term equilibrium value, resulting from the confrontation of the behaviour of two agents or even of a natural and uncontrolled evolution.Google Scholar
  3. 3.
    It will not give however a constant solution, as the exogenous variables change according to the growth assumptions presented earlier.Google Scholar
  4. 4.
    Which appears only because firms sell at one price, and buy capital at another.Google Scholar
  5. 5.
    By “outside” we mean not affecting directly an equation of the subsystem, as the exoge?nous assumptions listed above. Google Scholar
  6. 6.
    We have considered as zero eigenvalues not only the truly null ones but also the one with a modulus of less than 10–3.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 1997

Authors and Affiliations

  • Jean-Louis Brillet

There are no affiliations available

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