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In 1972 Lucas, [l] influenced by a 1961 agricultural economics paper by John Muth, [m] introduced rational expectations to macroeconomics. [110] Essentially, adaptive expectations modeled behavior as if it were backward-looking while rational expectations modeled economic agents (consumers, producers and investors) who were forward-looking. [111]
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. [1] This includes regional, national, and global economies .
Dynamic stochastic general equilibrium modeling (abbreviated as DSGE, or DGE, or sometimes SDGE) is a macroeconomic method which is often employed by monetary and fiscal authorities for policy analysis, explaining historical time-series data, as well as future forecasting purposes. [1]
The Lucas islands model is an economic model of the link between money supply and price and output changes in a simplified economy using rational expectations. It delivered a new classical explanation of the Phillips curve relationship between unemployment and inflation. The model was formulated by Robert Lucas, Jr. in a series of papers in the ...
Real business-cycle theory (RBC theory) is a class of new classical macroeconomics models in which business-cycle fluctuations are accounted for by real, in contrast to nominal, shocks. [1] RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment.
M0 = Federal Reserve Notes + US Notes + Coins. It is not relevant whether the currency is held inside or outside of the private banking system as reserves. MB: The total of all physical currency plus Federal Reserve Deposits (special deposits that only banks can have at the Fed). MB = Coins + US Notes + Federal Reserve Notes + Federal Reserve ...
The size and nature of the model will change because of the above considerations while building the same. According to Pesaran and Smith the macroeconometric model must have three basic characteristics viz. relevance, adequacy and consistency. [2] Relevance means the model must be according to the requirements of the desired output.
The structural equilibrium model is a matrix-form computable general equilibrium model in new structural economics. [30] [31] This model is an extension of the John von Neumann's general equilibrium model (see Computable general equilibrium for details). Its computation can be performed using the R package GE.