IDEAS home Printed from https://ideas.repec.org/p/uts/wpaper/108.html
   My bibliography  Save this paper

Output, Financial Markets and Growth

Author

Listed:

Abstract

In this paper we reconsider a macrodynamic model of Blanchard, which integrates output and stock market dynamics in a fundamental way. We add budget equations (and their implications) to all sectors of the economy, and also capital accumulation and growth (but not yet proper wage-price dynamics) and obtain a model of the real-financial interaction with quite different steady state characteristics as compared to the Blanchard approach. We furthermore allow for somewhat sluggish adjustment of share prices and capital gain expectations in place of perfect substitutes and perfect foresight. This brings our approach closer to completion and also makes it much more involved. Instead of the originally only 2D dynamics we now obtain a 4D dynamical system with two real and two financial variables and specific stability properties. However, by setting certain secondary expressions equal to their trend values, we can regain the mathematical form of the original 2D dynamics of Blanchard type. This form is now based on variables that allow for stationarity, when estimated, that therefore permit to estimate the model to get information about the magnitude of its adjustment speeds, the size of which is crucial for the stability of instability of this dynamical system.

Suggested Citation

  • Carl Chiarella & Peter Flaschel & Reiner Franke & Willi Semmler, 2000. "Output, Financial Markets and Growth," Working Paper Series 108, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:wpaper:108
    as

    Download full text from publisher

    File URL: http://www.finance.uts.edu.au/research/wpapers/wp108.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chiarella Carl & Semmler Willi & Mittnik Stefan & Zhu Peiyuan, 2002. "Stock Market, Interest Rate and Output: A Model and Estimation for US Time Series Data," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(1), pages 1-39, April.
    2. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
    3. Peter Flaschel & Carl Chiarella & Reiner Franke & Willi Semmler, 2001. "Output and Interest Rates. Jump Variable and Phase Diagram Switching Methodologies," CeNDEF Workshop Papers, January 2001 1B.1, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    4. Carl Chiarella & Peter Flaschel & Willi Semmler, 2003. "Real-Financial Interaction: Implications of Budget Equations and Capital Accumulation," Working Paper Series 127, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Flaschel & Willi Semmler, 2004. "Real-Financial Interaction: A Reconsideration of the Blanchard Model with a State-of-Market Dependent Reaction Coefficient," International Symposia in Economic Theory and Econometrics, in: Economic Complexity, pages 31-65, Emerald Group Publishing Limited.
    2. Carl Chiarella & Peter Flaschel & Reiner Franke & Willi Semmler, 2003. "Output and the Term Structure of Interest Rates: Ways Out of th Jump-Variable Conundrum," Working Paper Series 125, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    3. Willi Semmler, 2011. "Asset Prices, Booms and Recessions," Springer Books, Springer, number 978-3-642-20680-1, September.
    4. Fernando de Holanda Barbosa, 2017. "Hyperinflation: Inflation Tax and Economic Policy Regime," SpringerBriefs in Economics, in: Exploring the Mechanics of Chronic Inflation and Hyperinflation, chapter 0, pages 61-75, Springer.
    5. Stanley Fischer, 1991. "Growth, Macroeconomics, and Development," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 329-379, National Bureau of Economic Research, Inc.
    6. John Haltiwanger & Scott Schuh, 1999. "Gross job flows between plants and industries," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 41-64.
    7. Stefan Ried, 2009. "Putting Up a Good Fight: The Galí-Monacelli Model versus “The Six Major Puzzles in International Macroeconomicsâ€," SFB 649 Discussion Papers SFB649DP2009-020, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    8. Fredrik Carlsson & Dinky Daruvala & Olof Johansson‐Stenman, 2005. "Are People Inequality‐Averse, or Just Risk‐Averse?," Economica, London School of Economics and Political Science, vol. 72(287), pages 375-396, August.
    9. Christian Groth & Karl-Josef Koch & Thomas Steger, 2006. "Rethinking the Concept of Long-Run Economic Growth," CESifo Working Paper Series 1701, CESifo.
    10. J.P.G. Reijnders, 2007. "Impulse or propagation? How the tides turned in Business Cycle Theory," Working Papers 07-07, Utrecht School of Economics.
    11. Thomas Seegmuller, 2005. "Steady state analysis and endogenous fluctuations in a finance constrained model," Cahiers de la Maison des Sciences Economiques v05029, Université Panthéon-Sorbonne (Paris 1).
    12. Smulders, Sjak & Gradus, Raymond, 1996. "Pollution abatement and long-term growth," European Journal of Political Economy, Elsevier, vol. 12(3), pages 505-532, November.
    13. Andersen, Torben M., 2005. "Product market integration, wage dispersion and unemployment," Labour Economics, Elsevier, vol. 12(3), pages 379-406, June.
    14. Xavier Pautrel, 2015. "Abatement Technology and the Environment–Growth Nexus with Education," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(3), pages 297-318, July.
    15. McCallum, Bennett T, 2000. "Theoretical Analysis Regarding a Zero Lower Bound on Nominal Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 870-904, November.
    16. Radwanski, Juliusz, 2020. "On the Purchasing Power of Money in an Exchange Economy," MPRA Paper 104244, University Library of Munich, Germany.
    17. repec:hal:wpspec:info:hdl:2441/2961 is not listed on IDEAS
    18. Loewy, Michael B., 1995. "Equilibrium policy with dynamically naive agents," Journal of Macroeconomics, Elsevier, vol. 17(2), pages 319-331.
    19. Etienne Gagnon & David López-Salido & Nicolas Vincent, 2013. "Individual Price Adjustment along the Extensive Margin," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 235-281.
    20. Picard, Pierre M. & Toulemonde, Eric, 2006. "Firms agglomeration and unions," European Economic Review, Elsevier, vol. 50(3), pages 669-694, April.
    21. Franz R. Hahn, 2003. "Fully-Funded Public Old Age Pension Programs – Stranger Than Paradise?," WIFO Working Papers 203, WIFO.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uts:wpaper:108. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Duncan Ford (email available below). General contact details of provider: https://edirc.repec.org/data/sfutsau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.