Synopsis
1 - Setting the Scened.- 1 How to Use this Book.- 2 Distinguishing Features of MM.- 2.1 Overview of MM's relationship to other macro models.- (a) Size.- (b) Eclecticism.- (c) Relationship to macro and micro paradigms.- (d) Long-run properties.- (e) Specification testing.- 2.2 Main economic features.- (a) Dornbusch Model attributes.- (b) Lona-run optimizina behaviour in production.- (c) Feedback effects from assets.- 3 Principal Mechanisms in MM.- 3.1 Introduction.- 3.2 The Mundell-Fleming model.- (a) The MF model's equations.- (b) Monetary and fiscal policy under flexible exchange rates in the MF model.- 3.3 Dombusch's 1976 model.- (a) Basic assumptions.- (b) Underlying structural model.- (c) Partially reduced form.- (d) More on the underlying structural model - portfolio balance.- (e) Equilibrium exchange rate.- (f) Model consistent expectations.- (g) The effects of a monetary expansion under rational expectations.- 3.4 Insights from 1980s developments in open-economy macroeconomics.- 3.5 Synopsis of illustrative simulations with MM.- (a) Monetary expansion.- (b) The NAIRU and the neoclassical long run.- (c) Fiscal policy and public debt feedback.- (d) Private consumption and foreign debt feedback.- (e) Non-Ricardian equivalence.- 3.6 A highly stylized miniature model of balanced growth (HSM).- (a) Main assumptions underlying HSM.- (b) Production function and resource endowment.- (c) Capital accumulation and the rate of return; domestic inflation and exchange rate determination.- (d) Growth in capital stock, workforce, output and real wages.- (e) Intertemporal budget constraint.- (f) Balance of trade.- (g) Qualitative behaviour of HSM under parameter shifts.- (h) Growth rates of prices and of nominal and real magnitudes in HSM and in MM.- 3.7 Conclusions from this chapter.- 2 - Structural Form of MM.- 4 Overview of Part Two.- 4.1 Introduction.- 4.2 Notation.- 4.3 Nomenclature for equations.- 4.4 Estimation methods, specification searches and 82 hypothesis testing.- (a) General considerations.- (b) Data sources.- (c) Computing.- (d) Estim ation methods.- (e) Obtainina a preferred eauation.- (f) Diagnostic testing.- 4.5 Equation count and standard closure for simulations.- 4.6 Brief account of solution method.- 5 Wage Behaviour.- 5.1 Introduction.- 5.2 Technological change - basic ideas.- (a) Numerical example.- (b) Factor-augmenting technical change.- (c) Efficiency units.- 5.3 The role of Harrod-neutral technical progress in MM.- 5.4 Notation - Variables in wage equation SO3.- 5.5 Inflationary expectations augmented Phillips Curve.- Steady state.- 5.6 Estimated coefficients.- 6 Labour Force Participation.- 6.1 Introduction.- 6.2 Notation.- 6.3 Finding the underlying trend in the potential size of the workforce.- 6.4 Labour supply equation SO2.- 6.5 Estimated coefficients.- 6.6 Steadu state.- 6.7 Encouraged/discouraged worker effect.- 7 Private Consumption Behaviour.- 7.1 Introduction and notation.- 7.2 Equilibrium consumption - equations SO4A.- 7.3 Dynamic disequilibrium consumption equation S04.- 7.4 Steady state.- 7.5 Parameter Estimates.- 8 Behaviour of the Rental Price of Housing.- 8.1 Introduction and notation.- 8.2 Allocation of consumption into housing rental services and other.- 8.3 Dwelling rental price dynamics - within sample - equation S01.- 8.4 Steady state.- 8.5 Dwelling rental price dynamics - forecast period.- 8.6 Estimated coefficients.- 8.7 Behavioural identity 103 - consumption price index and identity I01, definition of real consumption.- 9 Production of Housing Rental Services and Investment in Dwellings.- 9.1 Introduction.- 9.2 Notation - Levels variables.- 9.3 Notation - Depreciation, interest, growth and inflation rates.- 9.4 Notation - Coefficients.- 9.5 Production of housing rental services - identity 104.- 9.6 The natural real growth rate - identities 171 and 172.- 9.7 Dwelling investment - equation SO5.- Present value calculation.- Expectations of investors in housing stock.- Steady state.- 9.8
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