Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model: Some Illustrative Examples

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Standard

Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model : Some Illustrative Examples. / Møller, Niels Framroze.

Cph. : Department of Economics, University of Copenhagen, 2006.

Research output: Working paper › Research

Harvard

Møller, NF 2006 'Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model: Some Illustrative Examples' Department of Economics, University of Copenhagen, Cph.

APA

Møller, N. F. (2006). Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model: Some Illustrative Examples. Department of Economics, University of Copenhagen.

Vancouver

Møller NF. Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model: Some Illustrative Examples. Cph.: Department of Economics, University of Copenhagen. 2006.

Author

Møller, Niels Framroze. / Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model : Some Illustrative Examples. Cph. : Department of Economics, University of Copenhagen, 2006.

Bibtex

@techreport{9192e020a48111dbbee902004c4f4f50,
title = "Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model: Some Illustrative Examples",
abstract = "This paper attempts to clarify the connection between simple economic theory models and the approach of the Cointegrated Vector-Auto-Regressive model (CVAR). By considering (stylized) examples of simple static equilibrium models, it is illustrated in detail, how the theoretical model and its structure and assumptions can be translated into a CVAR. We also see how the CVAR allows for explicit hypotheses about transitory dynamics, that could be relevant for assessing price rigidity, and hence, {"}the length of the short run{"} - a controversial issue in traditional macroeconomics. Moreover, it is demonstrated how other controversial hypotheses such as Rational Expectations can be formulated directly as restrictions on the CVAR-parameters. A simple example of a {"}Neoclassical synthetic{"} AS-AD model is also formulated. Finally, the partial- general equilibrium distinction is related to the CVAR as well. Further fundamental extensions and advances to more sophisticated theory models, such as those related to dynamics and expectations (in the structural relations) are left for future papers",
keywords = "Faculty of Social Sciences, cointegrated VAR, static theory models, AS-AD, price rigidities, rational expectations, general equilibrium",
author = "M{\o}ller, {Niels Framroze}",
note = "JEL Classification: C32",
year = "2006",
language = "English",
publisher = "Department of Economics, University of Copenhagen",
address = "Denmark",
type = "WorkingPaper",
institution = "Department of Economics, University of Copenhagen",

}

RIS

TY - UNPB

T1 - Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model

T2 - Some Illustrative Examples

AU - Møller, Niels Framroze

N1 - JEL Classification: C32

PY - 2006

Y1 - 2006

N2 - This paper attempts to clarify the connection between simple economic theory models and the approach of the Cointegrated Vector-Auto-Regressive model (CVAR). By considering (stylized) examples of simple static equilibrium models, it is illustrated in detail, how the theoretical model and its structure and assumptions can be translated into a CVAR. We also see how the CVAR allows for explicit hypotheses about transitory dynamics, that could be relevant for assessing price rigidity, and hence, "the length of the short run" - a controversial issue in traditional macroeconomics. Moreover, it is demonstrated how other controversial hypotheses such as Rational Expectations can be formulated directly as restrictions on the CVAR-parameters. A simple example of a "Neoclassical synthetic" AS-AD model is also formulated. Finally, the partial- general equilibrium distinction is related to the CVAR as well. Further fundamental extensions and advances to more sophisticated theory models, such as those related to dynamics and expectations (in the structural relations) are left for future papers

AB - This paper attempts to clarify the connection between simple economic theory models and the approach of the Cointegrated Vector-Auto-Regressive model (CVAR). By considering (stylized) examples of simple static equilibrium models, it is illustrated in detail, how the theoretical model and its structure and assumptions can be translated into a CVAR. We also see how the CVAR allows for explicit hypotheses about transitory dynamics, that could be relevant for assessing price rigidity, and hence, "the length of the short run" - a controversial issue in traditional macroeconomics. Moreover, it is demonstrated how other controversial hypotheses such as Rational Expectations can be formulated directly as restrictions on the CVAR-parameters. A simple example of a "Neoclassical synthetic" AS-AD model is also formulated. Finally, the partial- general equilibrium distinction is related to the CVAR as well. Further fundamental extensions and advances to more sophisticated theory models, such as those related to dynamics and expectations (in the structural relations) are left for future papers

KW - Faculty of Social Sciences

KW - cointegrated VAR

KW - static theory models

KW - AS-AD

KW - price rigidities

KW - rational expectations

KW - general equilibrium

M3 - Working paper

BT - Linking Simple Economic Theory Models and the Cointegrated Vector AutoRegressive Model

PB - Department of Economics, University of Copenhagen

CY - Cph.

ER -

ID: 312616