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Estimation and Analysis of an Extended AD–AS Model

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Part of the Dynamic Modeling and Econometrics in Economics and Finance book series (DMEF, volume 10)

The present chapter intends to provide empirical evidence for a crossover type of interaction of wage and price inflation rates, or more briefly for the wage-price spiral, and additionally formulates and estimates within a Keynesian Disequilibrium framework a macroeconomic model for the U.S. economy. It presents the feedback structures of this (semi-) reduced form of a macromodel and its stability implications, first on a general level and then on the level of the sign and size restrictions obtained from empirical estimates of the five laws of motion of the dynamics. These estimates, undertaken from the U.S. economy for quarterly data 1965.1–2001.1 also allow us to discuss asymptotic stability for the estimated parameter sizes and to determine stability boundaries.

Keywords

Monetary Policy Real Wage Capacity Utilization Phillips Curve Taylor Rule 
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