The Estimation of Macroeconomic Disequilibrium Models with by Glenn D. Rudebusch

By Glenn D. Rudebusch

Examines an econometric specification of the disequilibrium version that comes with non-stochastic information regarding industry extra call for. This disequilibrium specification might be simply expected with quite a lot of fascinating structural beneficial properties together with dynamical parts, an endogenous rate, and a number of markets. This specification is illustrated via the estimation of a single-market and a multimarket macroeconomic disequilibrium version.

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E , PT 18e. ,... ~Q.. ~o ,~. T Quit Rate Help Wanted Advertising Unemployment: ZHELPW - - - - ZQUIT -. - I ..... 1. - .... ',1. , . 7~ £878 T i87. eo .... T ~ Excess Supply Excess Demand ~ i8e2 II U ", II i8eo iae~ iaee iae. ~ 18es 1ase Layoff Unemployment ----ZLA YOF -ZU YE4R i870 1a72 187~ ~ 187S I,I, I I I I 187. 02!! 0215 Excess Demand II 1eee Ii ... \ \ \ \ \ 18e~ • I .... ~ \ ... \1 I 18ee \ I , ,, , I "jiii. YEAR 18ee 18ee Ii. , ..... - - - - ZPRODE Productivity 1872 ii', 1870 Nominal Wage Inlation 18S.

A stochastic trend could also be considered following the methods outlined in Watson (1986). 000 Besides providing a partitioning point to separate periods of excess supply from T those of excess demand, the trend Zt also normalizes the indicator for long-term changes. We need not be concerned with long-term structural shifts in the relationships between any of the measured statistics and excess demand, as these shifts will also be reflected in the equilibrium indicator rate. For instance, the secular increase in unemployment Ut in the last thirty years, in part due to demographic T changes in the labor force, will be matched by increases in UT t • Thus, Ut - Ut will remain a stable indicator.

This maximum likelihood procedure can only be implemented if the structural equations are sufficiently simple; here we examine a simple disequilibrium structure without dynamics or error covariances. First, we derive the likelihood functions for the exact indicator and stochastic indicator versions and then show that these specifications are nested and that a likelihood ratio test is appropriate. , Zt* = Zt E - Zt)· Also, the exact indicator equation is in slightly different (though equivalent) form where y = 1/ lb.

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