A note on nominal GNP targeting and the price level elasticity of aggregate demand

1993 ◽  
Vol 21 (1) ◽  
pp. 105-105
Author(s):  
Ben L. Kyer ◽  
Gary E. Maggs
Keyword(s):  
Price Level ◽  
Aggregate Demand

The 1738–41 Harvest Crisis in Scotland

2011 ◽  
Vol 90 (1) ◽  
pp. 27-63 ◽  
Author(s):  
Philipp Robinson Rössner
Keyword(s):  
Eighteenth Century ◽  
Business Cycle ◽  
Economic Impact ◽  
Economic History ◽  
Price Level ◽  
Aggregate Demand ◽  
Macro Level ◽  
Industrial Output ◽  
Industrial Economy ◽  
History Of

Between 1738 and 1741 Scotland experienced one of the harshest harvest crises and depressions in the eighteenth-century. After at least two consecutive harvest failures (in 1739 and 1740 and perhaps also in 1738) agrarian and industrial output contracted, the price level doubled, and average incomes fell below subsistence. Due to an increase in mortality, there was also a considerable contraction in aggregate demand. Data drawn from both the micro- as well as the macro-level shows the disastrous economic impact such deficient harvests – the depression's initial trigger – would have upon Scotland, a pre-industrial economy dominated by agriculture. Such shocks in agrarian supply tended to work out as general adverse shocks in aggregate supply, as the economy's business cycle was to a large extent determined by movements in the harvest cycle. The implicit task of the paper also is to point out the variety of available sources for, as well as one possible strategy of, writing a quantitative macro-economic history of eighteenth-century Scotland.

scholarly journals An Econometric Analysis of Price Behaviour in Pakistan

1973 ◽  
Vol 12 (4) ◽  
pp. 375-392 ◽  
Author(s):  
B. A. Azhar
Keyword(s):  
Price Level ◽  
Full Employment ◽  
Aggregate Demand ◽  
Labour Unions ◽  
Explanatory Variables ◽  
Price Increases ◽  
Demand Pull ◽  
Vast Literature ◽  
The Cost ◽  
Structural Theories

In this paper an attempt has been made to explore the major causes of price level changes in West Pakistan during the past thirteen years and to deter¬mine their relative importance in explaining the price fluctuations. A supple¬mentary object of the paper is to develop a predictive mechanism which may be used to forecast the response of price level to changes in the explanatory variables used in the regression model. There is vast literature on inflation theory [3] but not so much on quanti¬tative evidence. Broadly, there are three groups of theories of inflation: the demand pull theories, which state that inflationary pressures result from aggregate demand exceeding aggregate supply at full employment; the cost-push theories, which stress the producers' power to pass on cost increases in higher prices even when demand remains unchanged. The third group of theories, which take a mid-way position between the demand-pull and the cost-push theories, are a number of structural theories, notably those associated with the names of Ackley, Eckstein, and Schultze [1,5,11]. According to Ackley, inflation results from mark-up of prices. He considers the price policies of the firms and the wage policies of the labour unions to be responsible for inflation. He puts forward the hypothesis that mark ups used by business in setting prices and those applied by the labour unions to their cost of living for getting higher wages tend to rise in an inflationary situation which results in pyramiding of costs. Professor Otto Eckstein advances the hypothesis that inflation may be caused by price increases in certain bottleneck industries even when there is no over-all excess demand in the economy.

scholarly journals Impact of Federal Fiscal-Monetary Policy on Farm Structure

1983 ◽  
Vol 15 (1) ◽  
pp. 61-68 ◽  
Author(s):  
Luther Tweeten
Keyword(s):  
Price Level ◽  
Aggregate Demand ◽  
Farm Size ◽  
Full Time ◽  
Capital Labor Ratio ◽  
Farm Structure ◽  
Investment Capital ◽  
Part Time ◽  
On Farm ◽  
The Impact

This paper examines the impact of federal fiscal-monetary (FM) policy on farm structure. FM policy is multifaceted but is confined here mainly to policies influencing aggregate demand. Inflation is defined as an increase in the general price level. Farm structure refers to farm size and numbers, tenure, legal organization, investment, capital-labor ratio, productivity, and status (part-time or full-time farming).

scholarly journals Examining the differential impact of monetary policy in India: a policy simulation approach

2020 ◽  
Vol 25 (50) ◽  
pp. 339-362
Author(s):  
Sajad Ahmad Bhat ◽  
Bandi Kamaiah ◽  
Debashis Acharya
Keyword(s):  
Monetary Policy ◽  
Price Level ◽  
Negative Impact ◽  
Aggregate Demand ◽  
Differential Impact ◽  
Policy Action ◽  
Policy Simulation ◽  
Content Type ◽  
General Price Level ◽  
Aggregate Supply

Purpose Though an accumulating body of study has analysed monetary policy transmission in India, there are few studies examining the differential impact of monetary policy action. Against this backdrop, this study aims to analyse the differential impact of monetary policy on aggregate demand, aggregate supply and their components along with the general price level in India. Design/methodology/approach The study develops a structural macroeconometric model, which is primarily aggregate and eclectic in nature. The generalized method of movements is used for estimation of behavioural equations, while a Gauss–Seidel algorithm is used for model simulation purposes. Findings The paper presents the results of two policy simulations from the estimated model that highlight the differential impact of monetary policy. The first one, hike in the policy rate by 5% and second is a reduction in bank credit to the commercial sector by 10%. The results from the first policy simulation experiment reveal that interest hike has a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is borne by investment demand and imports followed by private consumption. While as among the components of aggregate supply maximum impact is born by infrastructure output followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. The results from the second policy simulation experiment revealed that pure monetary shocks have a significant negative impact on aggregate demand, aggregate supply and general price level. However, the maximum impact is born by private consumption and imports followed by investment demand. While as among components of aggregate supply maximum impact is borne by infrastructure followed by the manufacturing and services sector with the agriculture sector found to be insensitive in nature. From both policy simulation experiments, the study highlighted the relative importance of the income absorption approach as opposed to the expenditure switching effect. Practical implications The results obtained in this study provides a strong framework for design the monetary policy framework. The results are in a view of the differential impact of monetary policy action among the components of both aggregate demand and aggregate supply. This reflection of differential impact has immense significance for the macroeconomic stabilization as the central bank will have to weigh the varying repercussion of its actions on different sectors. For instance, the decline in output after monetary tightening might be conceived as mild from an overall perspective, but it can be appreciable for some sectors. This differential influence will have an implication for policy design to care for distributional aspects, which otherwise could be neglected/disregarded. Similarly, the output decline may be as a result of either consumption postponement or a temporary slowdown in investment. However, the one emanating due to investment decline will have lasting growth implications compared to a decline in consumer demand. In addition, the relative strength of expenditure changing or expenditure switching policies of trade balance stabilization may have varying consequences in the aftermath of monetary policy shock. Accordingly information on the relative sensitiveness/insensitiveness of different sectors/ components of aggregate demand towards monetary policy actions furnish valuable insights to monetary authorities in framing appropriate policy. Originality/value The work carried out in the present paper is motivated by the fact that although a number of studies have examined the monetary transmission mechanism in India, a very few studies examining the differential impact of monetary policy action. However, to the best of the knowledge, there is no such studies, which have examined the differential impact of monetary policy in the structural macro-econometric framework. The paper will enrich the existing literature by providing a detailed account of the differential impact of monetary policy among the components of both aggregate demand and aggregate supply in response to an interest rate hike, as well as a decrease in the money supply.

scholarly journals Economic Expansion and The Balance of Trade: The Role of Aggregate Demand Elasticity

2014 ◽  
Vol 59 (2) ◽  
pp. 176-181 ◽  
Author(s):  
Ben L. Kyer ◽  
Gary E. Maggs
Keyword(s):  
Price Level ◽  
Aggregate Demand ◽  
Trade Deficit ◽  
Demand Elasticity ◽  
Trade Surplus ◽  
Economic Expansion ◽  
General Price Level ◽  
Short Run ◽  
Balance Of Trade

This paper investigates the role of aggregate demand elasticity for the balance of trade when economic expansion occurs. We have two conclusions. First, when an economic expansion results from an increase of aggregate demand, the balance of trade deficit is larger the less elastic is aggregate demand with respect to the general price level. Second, when an economic expansion happens from an increase of short-run aggregate supply, the price level elasticity of aggregate demand determines both the direction of change of the balance of trade and the size of the resulting deficit or surplus. We show here that a relatively elastic aggregate demand can result in a balance of trade deficit, while a relatively inelastic aggregate demand can yield a balance of trade surplus.

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