Showing papers on "Potential output published in 1983"
TL;DR: The authors compared simplified versions of three macroeconomic models: the Income-Expenditure model, the St Louis model, and the Rational Expectations model and found that the St. Louis model best describes the data.
4 citations
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TL;DR: The MACE model of Canada employs a nested production structure in which there is a vintage bundle of capital and energy that is combined with efficiency units of labour to define potential output for given quantities of employed factors as discussed by the authors.
Abstract: The MACE model of Canada employs a nested production structure in which there is a vintage bundle of capital and energy that is combined with efficiency units of labour to define potential output for given quantities of employed factors. The actual level of output is derived from an estimated utilization-rate equation, in which the ratio of actual to potential output depends on unexpected sales, profitability, and the gap between actual and desired inventories. Using this production structure, it is possible to attribute 30% of the decline in labour productivity between 1973 and 1982, relative to a steady growth case, to desired substitution of labour for energy, one-third to unexpectedly low demand, and one-fifth to low profitability. The unexplained residual is less than one-fifth. The macroeconomic structure of the model is then used totrace the underlying reasons for the differences between steady growth and actual history. It is concluded that most of the changes in factor proportions, demand, and profitability in Canada were due to the changes in world oil prices and the parallel changes in inflation and real output in other industrial countries.
3 citations
TL;DR: In this article, the authors extend Bailey and Scarth's analysis to include a potential output constraint confronting individual firms and discuss the assumptions underlying the derivation of an investment demand function and the implications for the Keynesian macroeconomic model.
Abstract: dynamic theory of the firm to obtain "changes in the standard macroeconomic model that are required for it to be consistent with the existence of adjustment costs" (p. 423). The Bailey and Scarth paper is important for its attempt to integrate optimizing behaviour of individuals into macroeconomic analysis, and the paper claims some startling discoveries in the process. However, there are several areas in which the analysis can be extended. In Section I, we alter the derivation of firm investment demand, given adjustment costs, to include a potential output constraint confronting individual firms. In Section II we discuss the assumptions underlying Bailey and Scarth's derivation of an investment demand function and indicate the implications for the Keynesian macroeconomic model. Section III presents the implications for the IS-LM macroeconomic model.
1 citations