Open AccessShadow Pricing and Macroeconomic Analysis: Some Illustrations from Pakistan
Author(s) -
Lyn Squire,
I. M. D. Little,
M. Durdag
Publication year - 1979
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v18i2pp.89-112
Subject(s) - shadow (psychology) , shadow price , economics , general equilibrium theory , macro , econometrics , partial equilibrium , frame (networking) , mathematical economics , set (abstract data type) , macroeconomics , computer science , mathematics , mathematical optimization , psychology , psychotherapist , programming language , telecommunications
Shadow prices are being used increasingly in the economicanalysis of projects. The purpose of this paper, however, is to arguethat shadow prices are equally relevant for certain types of analysis atthe macro-economic level. In theory, macroeconomic issues can beproperly analyzed, if at all, only in general equilibrium frame• work.Quantification then requires the solution of an appropriate model. But,estimable general equilibrium models can seldom include many variables,and the level of aggregation must remain high. They are general only inthe very partial sense of simultaneous solution of a limited set ofaggregated endogenous variables. On the other hand, some of the issuesaddressed by shadow pricing involve quite disaggregated variables, and,of course, project analysis itself often requires very detailedestimations.