Lectures in Macroeconomics- Charles W. Upton Fitting the Facts.

Lectures in Macroeconomics- Charles W. Upton

Fitting the Facts

D

SSRSLR

H*

w*

Fitting the Facts

Differences

D

SSRSLR

H*

w*

Fitting the Facts

A Temporary Demand Decrease

D

SSRSLR

H*

w*

Fitting the Facts

A Temporary Demand Decrease

D

SSRSLR

H*

w*Decline in output

followed by increase in

output

Fitting the Facts

A Temporary Demand Decrease

D

SSRSLR

H*

w*Decline in output

followed by increase in

output

Increase in output

followed by decrease in

output

Fitting the Facts

Imperfect Information

D

SSRSLR

H*

w*

Fitting the Facts

Imperfect Information

D

SSRSLR

H*

w*Increase in

output followed by decrease in

output

Fitting the Facts

Imperfect Information

D

SSRSLR

H*

w*Increase in

output followed by decrease in

output

Decrease in output

followed by increase in

output

Fitting the Facts

Technology Decline

D

SSRSLR

H*

w*

Fitting the Facts

Technology Decline

D

SSRSLR

H*

w*

No secondary effects

Fitting the Facts

Technology Decline

D

SSRSLR

H*

w*

No secondary effects

A smaller than average growth

or negative growth is likely to be followed

by normal growth

Fitting the Facts

Technology Shift

11)()(

tt

tt

A

AA

A

Fitting the Facts

Technology Shift

0),(, 11])()[(

tttt corrA

A

A

Acorr

Fitting the Facts

Technology Shift

0])()[( 1,

tt Y

Y

Y

Ycorr

Fitting the Facts

Imperfect Information Model

0])()[( 1,

tt Y

Y

Y

Ycorr

Fitting the Facts

Temporary Demand Shift Model

0])()[( 1,

tt Y

Y

Y

Ycorr

Fitting the Facts

Which Fits the Facts

tY

Y

1

tY

Y

Fitting the Facts

Imperfect Information

tY

Y

1

tY

Y

Fitting the Facts

Imperfect Information

tY

Y

1

tY

Y

Fitting the Facts

Real Business Cycles

tY

Y

1

tY

Y

tA

A

Fitting the Facts

Real Business Cycles

tY

Y

1

tY

Y

Fitting the Facts

Real Business Cycles

tY

Y

1

tY

Y

Fitting the Facts

So what are the facts

-4

-2

0

2

4

-4 -2 0 2 4

Fitting the Facts

So what are the facts

-4

-2

0

2

4

-4 -2 0 2 4

This is a graph of the growth in GDP versus last

quarter’s GDP growth.

Fitting the Facts

So what are the facts

-4

-2

0

2

4

-4 -2 0 2 4

r=0.34

Fitting the Facts

So what are the facts

-4

-2

0

2

4

-4 -2 0 2 4

r=0.34

Other estimates are that 60% of the

fluctuations in GDP are due to

fluctuations in A

Fitting the Facts

So what are the facts

-4

-2

0

2

4

-4 -2 0 2 4

r=0.34

r=0.19

Fitting the Facts

So what are the facts

-4

-2

0

2

4

-4 -2 0 2 4

r=0.34

r=0.19

r=-0.01

Fitting the Facts

Three Quarter Lag

-4

-3

-2

-1

0

1

2

3

4

-4 -2 0 2 4

Fitting the Facts

End

©2004 Charles W. Upton. All rights reserved