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Modelling the Macroeconomic Policy Framework for an Emerging Market Economy[Note 1. The authors acknowledge useful comments from two anonymous referees ...]
Author(s) -
Green Christopher J.,
Murinde Victor
Publication year - 1998
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00103
Subject(s) - economics , orthodoxy , macro , macroeconomic model , aggregate (composite) , macroeconomics , work (physics) , aggregate demand , balance of payments , aggregate supply , econometrics , monetary policy , computer science , mechanical engineering , engineering , history , materials science , archaeology , composite material , programming language
We propose a macroeconomic model suitable for policy analysis for an emerging market economy (EME). The model neither uncritically applies conventional macro theory nor departs altogether from orthodoxy; rather, it modifies the conventional framework and captures the distinctive features of EMEs. The structure of the model is reduced to three equations: aggregate demand, aggregate supply and the balance of payments. We use these directly to derive policy multipliers. The model innovatively encompasses competing hypotheses from the neoclassical and new‐structuralist paradigms, and the three‐equation format is particularly convenient for simulation experiments and other empirical work for EMEs with finite macroeconomic series.