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Stochastic simulations of a macroeconomic disequilibrium model for West Germany

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  • Schellhorn, Martin
  • Winker, Peter

Abstract

In this paper a macroeconometric disequilibrium model for West Germany is presented and its quality for policy simulations and forecasting are analyzed using stochastic in-sample simulations. The model is built on a dynamic disequilibrium model of firms' behaviour. Due to delayed adjustment of production inputs, and sluggish adjustment of wages and prices, a market disequilibrium can arise on labour and goods micro markets. Aggregation leads to an explicit functional form for aggregate transactions on labour and goods markets dependent on aggregate supply, demand, and mismatch. The empirical application of the model confirms that underutilization of labour and capital are important phenomena. Shares of firms facing different constraints on the goods and labour market can be derived from the model. These proportions changed considerably during the last three decades. Some deterministic simulations of different shocks affecting the economy including fiscal and monetary shocks, and migratory movements showed a strong influence of the prevailing rationing regime on the outcomes. The robustness of these results is assessed using stochastic in-sample simulations for the period 1981-1988. Simulations using stochastic errors for the model's 23 estimated equations help to evaluate the effects of non-linearities and dynamic features on the forecasting quality of the model. Furthermore, a comparison between deterministic and different stochastic simulations allows the conclusion to be drawn that notwithstanding the non-linearities and dynamic features the Simulation properties of the model are reasonable in general.

Suggested Citation

  • Schellhorn, Martin & Winker, Peter, 1994. "Stochastic simulations of a macroeconomic disequilibrium model for West Germany," Discussion Papers, Series II 235, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:235
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    References listed on IDEAS

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    1. Smolny, Werner, 1995. "Employment and unemployment in Germany: Some results from a macroeconomic disequilibrium model," Discussion Papers, Series II 247, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    2. Franz, Wolfgang & Göggelmann, Klaus & Winker, Peter, 1996. "Ein makroökonometrisches Ungleichgewichtsmodell für die deutsche Volkswirtschaft 1960 bis 1994: Konzeption, Ergebnisse und Erfahrungen," Discussion Papers, Series II 327, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    3. Göggelmann, Klaus & Franz, Wolfgang & Winker, Peter, 1997. "Einige Wirkungen von steuerlichen Umfinanzierungsmaßnahmen in einem makroökonometrischen Ungleichgewichtsmodell für die westdeutsche Volkswirtschaft," ZEW Discussion Papers 97-19, ZEW - Leibniz Centre for European Economic Research.
    4. Franz, Wolfgang & Göggelmann, Klaus & Schellhorn, Martin & Winker, Peter, 1998. "Quasi-Monte Carlo Methods in Stochastic Simulations: An Application to Fiscal Policy Simulations using an Aggregate Disequilibrium Model of the West German Economy," ZEW Discussion Papers 98-03, ZEW - Leibniz Centre for European Economic Research.
    5. Hettich, Frank & Killinger, Sebastian & Winker, Peter, 1996. "Die ökologische Steuerreform auf dem Prüfstand: Zur Kritik am Gutachten des Deutschen Instituts für Wirtschaftsforschung," Discussion Papers, Series II 311, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".

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