Demand-side Models of Short-term Income Formation

The Macroeconomics of Developing Countries ◽

10.1093/oso/9780198856672.003.0003 ◽

2020 ◽

pp. 77-124

Author(s):

Giovanni Andrea Cornia

Keyword(s):

Private Consumption ◽

Aggregate Demand ◽

Fiscal Policies ◽

Demand Side ◽

Closed Economy ◽

Demand Model ◽

Short Term ◽

Advanced Economies ◽

Policy Shocks ◽

Exogenous Factors

The chapter discusses different formulations of the main behavioural equations for private consumption, investments, and money demand that are used in the advanced economies for building a short-term Keynesian aggregate demand model, and the IS-LM, AS-AD, and Mundell–Fleming models. These models are used to study the formation of the level of income over the short term in the advanced countries, under both open and closed economy conditions. As such, these models allow us to study the fluctuations of the level of income over the short term due to exogenous factors or policy shocks, for example expansionary or contractionary fiscal policies, monetary and wage policies, or changes in consumer and investor expectations. The chapter identifies the conditions implicit in such models for the success of expansionary policies in advanced countries.

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Monetary and Fiscal Policies in the COVID-19 Crisis. Will They Work?

Journal of Business Accounting and Finance Perspectives ◽

10.35995/jbafp2030018 ◽

2020 ◽

Vol 2 (3) ◽

pp. 1

Author(s):

Daniel Lacalle

Keyword(s):

World War Ii ◽

Aggregate Demand ◽

Recovery Process ◽

Time Frame ◽

Fiscal Policies ◽

Demand Side ◽

Economic Sectors ◽

Supply Shock ◽

The World ◽

Economic Regions

The spread and mortality rate of the COVID-19 virus has created enormous strains on global healthcare systems and driven governments to take extreme measures to contain the virus, including the lock down of most citizens and shutting down most economic sectors. Due to these unique challenges and coming from an economy that was weak already in 2018 and 2019, the world faces a global crisis of unprecedented impact and high uncertainty about the recovery process. In this paper, we analyze how the world economy is addressing the COVID-19 pandemic. We start with the situation of the main economic regions at the end of last year to understand the tools available to fight against what could be the worst crisis since World War II, according to the IMF1. Moreover, we review the estimated economic impact of COVID-19, as well as the expected recovery and its time frame. Additionally, we reflect on the fiscal and monetary measures adopted by different countries, especially G7 economies, to tackle the crisis. Finally, we discuss the optimal policies to overcome the situation and advance towards economic recovery and the stabilization of public finances. This crisis is a supply shock added to a forced shutdown of the economy. As such, traditional tools to boost credit demand and usual demand-side policies alone are likely to generate little positive effect, as any aggregate demand that may be incentivized will not likely be followed by aggregate supply. A combination of demand-side and supply-side measures may prove to be more effective to boost the recovery after the pandemic.

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Stabilization and Economic Growth in Developing Countries (Invited Lecture)

The Pakistan Development Review ◽

10.30541/v26i3pp.341-361 ◽

1987 ◽

Vol 26 (3) ◽

pp. 341-361

Author(s):

Mohsin S. Khan

Keyword(s):

Economic Growth ◽

Developing Countries ◽

Exchange Rate ◽

Real Exchange Rate ◽

Aggregate Demand ◽

Domestic Demand ◽

Balance Of Payments ◽

Fiscal Policies ◽

Demand Side ◽

Aggregate Level

The need for stabilization typically arises when a country experiences an imbalance between domestic aggregate demand and aggregate supply, which is reflected in a worsening of its external payments position and an increase in the rate of inflation. To combat these twin problems, policies are required that restrain domestic demand and, at the same time, expand the production of tradeable goods, thereby easing the balance of payments constraint. Policies to influence the aggregate level or rate of growth of domestic demand and absorption, generally labelled as "demand side policies", include the whole range of monetary and fiscal measures, while the shifting of resources towards the production of tradeables involves altering the country's real exchange rate through devaluation. In general, monetary and fiscal policies and exchange rate action are considered an integral, if not an indispensable component of any stabilization programme.

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Genesis, Context, Focus, and Accounting Relations of Standard Macroeconomics

The Macroeconomics of Developing Countries ◽

10.1093/oso/9780198856672.003.0001 ◽

2020 ◽

pp. 3-24

Author(s):

Giovanni Andrea Cornia

Keyword(s):

Growth Models ◽

Balance Of Payments ◽

Historical Evolution ◽

Demand Side ◽

Short Term ◽

Macroeconomic Theory ◽

Advanced Economies ◽

Distribution Of Income

This chapter defines the field of investigation and the main issues analysed by short-term, demand-side macroeconomics and long-term growth models in the now advanced economies. It presents also the set of accounting relations (for the production, uses, and distribution of income, for the balance of payments, and for the macro financial accounts) that are used to describe the functioning of the macroeconomy, and to assess its performance. Finally, it discusses briefly the context and historical evolution of macroeconomic theory during the last two centuries, by referring to the classical, Keynesian, neoclassical synthesis, monetarist, new classical, and structuralist macroeconomic approaches.

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Do Money Targets Matter for Monetary Policy in Kenya?

10.1093/oso/9780198785811.003.0016 ◽

2018 ◽

Author(s):

Michal Andrle ◽

Andrew Berg ◽

Enrico Berkes ◽

R. Armando Morales ◽

Rafael Portillo ◽

...

Keyword(s):

Monetary Policy ◽

Money Demand ◽

Aggregate Demand ◽

Demand Forecasting ◽

Money Growth ◽

Structural Shocks ◽

Macroeconomic Volatility ◽

Ex Post ◽

Policy Shocks ◽

General Specification

The framework in Chapter 15 is extended to incorporate an explicit role for money aggregates, with an application to Kenya. The chapter provides a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. A novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc.) is presented. In the case of Kenya, the authors find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex post target adherence, the greater the macroeconomic volatility.

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An Aggregate-Demand Model for Automobiles

The Journal of Business ◽

10.1086/294785 ◽

1965 ◽

Vol 38 (3) ◽

pp. 252 ◽

Cited By ~ 6

Author(s):

Thomas R. Dyckman

Keyword(s):

Aggregate Demand ◽

Demand Model

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Hybrid demand model for load estimation and short term load forecasting in distribution electric systems

IEEE Transactions on Power Delivery ◽

10.1109/61.853017 ◽

2000 ◽

Vol 15 (2) ◽

pp. 764-769 ◽

Cited By ~ 51

Author(s):

S.A. Villalba ◽

C.A. Bel

Keyword(s):

Load Forecasting ◽

Load Estimation ◽

Demand Model ◽

Short Term ◽

Short Term Load Forecasting

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What Has Publishing Inflation Forecasts Accomplished? Central Banks and Their Competitors

The Oxford Handbook of the Economics of Central Banking ◽

10.1093/oxfordhb/9780190626198.013.24 ◽

2019 ◽

pp. 736-778 ◽

Cited By ~ 1

Author(s):

Pierre L. Siklos

Keyword(s):

Global Financial Crisis ◽

Central Banks ◽

Output Gap ◽

Great Moderation ◽

Confidence Set ◽

Short Term ◽

Inflation Forecasts ◽

Advanced Economies ◽

The Global Financial Crisis ◽

Model Confidence Set

This chapter explores short-term sources of inflation forecast disagreement in nine advanced economies. Domestic versus global factors among other determinants are considered. The chapter also adapts an idea from the model confidence set approach to obtain a quasi-confidence interval for inflation forecast disagreement. Some forecasters may change their outlook, especially when data are frequently revised (e.g., the output gap). This extension is also considered. Estimates of disagreement are found to be sensitive to the chosen benchmark, and central banks need not always be the benchmark of choice. The range of forecast disagreement can be high even when levels of disagreement are low. There is little evidence that forecasts are strongly coordinated with those of the central bank. Finally, at least over the period considered, which covers the end of the Great Moderation and the global financial crisis, there is consistent evidence that global factors impact forecast disagreement.

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