An Econometric Model of the US Economy: Structural Analysis in 56 Equations

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Book Description

This ebook An Econometric Model of the US Economy: Structural Analysis in 56 Equations (PDF) explores the US economy from 1960 to 2010 using a more Keynesian; Cowles model approach; which the author argues has substantial advantages over the vector autoregression (VAR) and dynamic stochastic general equilibrium (DSGE) models used almost exclusively today. Heim presents a robust argument in favor of the Cowles model as an answer to the pressing; unresolved methodological question of how to accurately model the macroeconomy so that policymakers can reliably use these models to assist their decision making. Thirty-eight behavioral equations; describing determinants of variables such as taxes; consumption; and government spending; are connected by eighteen identities to construct a comprehensive model of the real US economy that Heim then tests across four different time periods to ensure that results are consistent. This comprehensive demonstration of the value of a long-ignored model provides overwhelming evidence that the more Keynesian (Cowles) structural models outperform DSGE and VAR; and therefore should be the models of choice in future macroeconomic studies.