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A keynesian macro‐econometric model of the UK: 1955–1984
Author(s) -
Desai Meghnad,
Weber Guglielmo
Publication year - 1988
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.3950030102
Subject(s) - economics , disequilibrium , macro , unemployment , wage , econometrics , new keynesian economics , money supply , short run , keynesian economics , macroeconomics , monetary policy , labour economics , computer science , ophthalmology , programming language , medicine
In this paper we present a small Keynesian macro‐economic model in which wage‐price determination is linked to the working of goods and money markets. By explicitly treating the Keynes effect we derive a general expression for the employment‐money supply elasticity, and draw the IS‐LM loci in the employment‐interest rate space Our empirical specification allows for short‐run disequilibrium dynamic adjustments around the static long‐run relations predicted by the theoretical model. By careful use of our specification search strategy we obtain a statistically sound econometric model, which exhibits sensible long‐run properties. A remarkable finding implied by our estimates is that equilibrium unemployment is negatively affected by both money supply and incomes policy.