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This paper presents a dynamic model of the industrial demands for structures, equipment, and blue- and white-collar labor. Our approach is consistent with producers holding rational expectations and optimizing dynamically in the presence of adjustment costs, yet it permits generality of...
Persistent link: https://www.econbiz.de/10013324488
Studies of the firm's demand for factor inputs often assume a constant rate of utilization of the inputs and ignore the fact that the firm can simultaneously choose the level and the rate of utilization of its inputs. In particular, the literature on dynamic factor demand models has, until...
Persistent link: https://www.econbiz.de/10013139928
In this paper we discuss recent advances in modeling and estimating dynamic factor demand models, and review the use of such models in analyzing the production structure, the determinants of variable and quasi-fixed factors, and productivity growth. The paper also discusses the traditional...
Persistent link: https://www.econbiz.de/10013229343
Prucha and Nadiri (1982,1986,1988) introduced a methodology to estimate systems of dynamic factor demand that allows for considerable flexibility in both the choice of the functional form of the technology and the expectation formation process. This paper applies this methodology to estimate the...
Persistent link: https://www.econbiz.de/10013231586
Using a new set of directly observed wage expectations among firms, this paper finds that in general firms' forecasts fail the unbiasedness and efficiency requirements of weak-form rational expectations. These market participants consistently underestimate the wages they actually end up paying,...
Persistent link: https://www.econbiz.de/10013239987
We document extreme bias and dispersion in the small sample distributions of five standard regression tests of the expectations hypothesis of the term structure of interest rates. These biases derive from the extreme persistence in short interest rates. We derive approximate analytic expressions...
Persistent link: https://www.econbiz.de/10014158862
in pre-rational expectations macroeconomic theory. Here we show that electoral cycles in taxes, government spending and …
Persistent link: https://www.econbiz.de/10014105336
The simplest macroeconomic models in which markets clear instantaneously, and expectations are rational preclude the existence of "business cycles," that is, of serially correlated deviations of output from trend. This paper studies one of several mechanisms that can be used to make these...
Persistent link: https://www.econbiz.de/10014135401
We propose a novel approach to deal with the problem of indeterminacy in Linear Rational Expectations models. The method consists of augmenting the original model with a set of auxiliary exogenous equations that are used to provide the adequate number of explosive roots in presence of...
Persistent link: https://www.econbiz.de/10012953981
We argue that standard modeling practices often overstate the potency of general-equilibrium (GE) mechanisms. We formalize the notion that GE adjustment is weak, or that it takes time, by modifying an elementary Walrasian economy in two alternative manners. In one, we replace Rational...
Persistent link: https://www.econbiz.de/10012956930