Innovations in Macroeconomics by Paul J.J. Welfens

By Paul J.J. Welfens

Modern macroeconomics suffers from an doubtful hyperlink among temporary Keynesian research and long term development modelling. This publication provides a brand new hyperlink among financial research and progress modelling in open economies. Structural swap, recommendations and development are thought of from a brand new point of view. With recognize to monetary coverage - specifically innovation coverage - the research implies significant alterations, pertaining to either ecu international locations and different top OECD economies.

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For example, if an integration club such as the EU25 (or individual member countries) should move towards a less consistent politico-economic system, this implies a fall of the level of per capita income. Moreover, if the social security system becomes too generous in the sense of A. Globalization, Specialization and Innovation Dynamics 23 weakening Ȝ, the effect on per capita output will also be negative. ) Let us adopt the standard assumption of the neoclassical growth model, namely that labor and technology grow with a constant rate, that is L(t) = L0 e’nt and A(t) = A0 e’at (n and a are assumed to be exogenous positive parameters).

If ı > 1, the income-induced rise of the real demand for money would be so large that it would require a fall of the price level for equilibrium in the money market to be restored. Whatever the specification of the demand for money, there will always be a critical value of the income elasticity below which a rise of A has to be accompanied by a rise of the price level if a new equilibrium is to be achieved in the money market. Basically, we have an interesting empirical question on the one hand and on the other hand the idea presented reinforces the natural skepticism one has when simple analogies from microeconomics are drawn to derive macroeconomic conclusions.

His analysis leaves the broader implications unclear. Here we write a = a0 + h”į1 while taking into account that the rise of į has reduced the level of the growth rate. As regards the increasing role of information and communication technology – that is the relatively rising role of software compared to hardware – one may argue that h” (a positive parameter) is higher in the age of modern ICT than in the 1960s or 1970s. A further refinement could be the assumption that the government deficit ratio is a negative function of n so that a fall of n brings a rise of the structural deficit ratio.

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