Abstract
This chapter is devoted to the real part of the model. Since we are mainly concerned with monetary phenomena, the empirical modelling of these nonmonetary sectors has been kept as simple as possible. The main structure of this part of the model can be illustrated by means of the well-known identity of gross domestic product.
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References
Our reasons for using non-seasonally adjusted data are listed in Section 4.3.3.
See e.g. Kuipers, Muysken and Van Sinderen (1979), Table 4.
We do not want to dwell upon the other disadvantages of the CPB’s vintage approach. A summary of the discussion of these models can be found in Driehuis and Van der Zwan (1978).
See Driehuis, et al. (1979), p. 159 and following for an extensive discussion of this approach.
For a derivation of this condition one is referred to Driehuis et al. (1979), pp. 162 and 163. They also show that under perfect competition, the scrapping condition used in the CPB-models equals this replacement criterium.
See Driehuis et al. (1979), p. 163.
This result may arise from the fact that the time series of h does not show any fluctuation within the year and thus is an inadequate measure of the quarterly changes in working time.
Note that the residuals in the relations presented in Driehuis et al. (1979) are also autocorrelated. The corresponding DW-statistic of their relations varies between 1.28 and 1.44 (See their Table 7, p. 178).
Of course, there are also costs associated with operating below full capacity level. These costs are incorporated in the price equations by means of the degree of capacity utilization. Then it is assumed that in the case of a low or decreasing degree of capacity utilization entrepreneurs will lower the price in order to increase the demand for their products and thus reduce the gap between the actual and the capacity level of output. The derivation presented in the text is based on Fair (1976).
We have also estimated some relations that were derived from the error correction mechanism applied in Hendry and Von Ungern-Stenberg’s (1981) study on consumers’ expenditures. Then a term is added to the objective function that allows for more adjustment at a given cost when the target of yt has changed than when it is constant. The relevant parameter appeared to be highly insignificant.
The relation does not contain ΔΔ4Zd because its coefficient appeared to be insignificant (t-value of about 0.5). It should be noticed that CONSp is in current prices so that the real interest rate most likely partly reflects a change of prices.
Investments in dwellings and those in ships and aeroplanes are exogenous too in most CPB-models (see, e.g. Van den Berg et al., 1983, p. 35).
The same assumptions are made in Hasselman et al., 1983, p. 35. Their way of modelling the influence of the expected demand on net investments forms the basis of the relation presented in the text.
See, e.g. Branson (1979), pp. 230–233 for a derivation of this relation.
See Siebrand and Swank (1986), p. 297 for the consequences of this different modelling of the relation between unemployment and the wage rate. It should be noted that in case of a vertical Phillips curve this trade-off does not exist.
See also De Nederlandsche Bank (1984), p. 63.
All three lag schemes have been estimated under the assumption of a linear polynomial and end-point restrictions for near (see footnote 35 in Chapter 4 for details).
See Van Wallenburg (1977), p. 57. It should be noted that this statement is not based on an analysis of the depreciation methods employed by Dutch firms but on a prior information.
Contrary to e.g. Driehuis et al. (1979), no account has been taken of the influence of government’s subsidies on the costs of a project.
See e.g. Salter (1969), p. 20.
This lag of two periods in the influence of the price of competitors on the price of exports does not exist if the former is approximated by the price of competitors used in MORKMON. The latter has not been used in the model, because its time series did not contain observations for the 1960s, so that it precluded the possibility of including distributed lags in the price terms of the equation of the exports of goods.
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© 1991 Springer-Verlag Berlin Heidelberg
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de Jong, E. (1991). The Non-Financial Sectors of the Model. In: Exchange Rate Determination and Optimal Economic Policy Under Various Exchange Rate Regimes. Lecture Notes in Economics and Mathematical Systems, vol 359. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-51668-9_5
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DOI: https://doi.org/10.1007/978-3-642-51668-9_5
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