Empirical determination of aggregate demand and supply curves: The example of the RWI Business Cycle Model

摘要

Macroeconometric models are often criticised for being too complex and difficult to read in theoretical terms. To overcome these difficulties, Hickman suggested the calculation of a model's implicit aggregate demand/ supply (AD/AS) structure. The method helps to understand models and their main properties in theoretical terms and facilitates detailed model comparisons. This paper uses the AD/AS-1S/LM apparatus to analyse the simulation properties of the RWI (Rheinisch-Westfalisches Institut fur Wirtschaftsforschung) Business Cycle Model, a medium-sized short-term macroeconometric model for Germany. The results confirm theo retical expectations for AD and AS elasticities and reveal particular reactions linked to peculiar model speci fications such as an endogenous government sector. The results are also much in line with a previous study in a multi-country model context.