Supply-Side Economics and the Price Level Elasticity of Aggregate Demand

1996 ◽  
Vol 24 (1) ◽  
pp. 88-98 ◽  
Author(s):  
Ben L. Kyer ◽  
Gary E. Maggs
Keyword(s):  
Price Level ◽  
Aggregate Demand ◽  
Supply Side

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 Effect of New Deal Policies Revisited

2020 ◽  
Author(s):  
Yangyang Ji
Keyword(s):  
New Deal ◽  
Aggregate Demand ◽  
American Economic Review ◽  
Supply Side ◽  
Natural Rate ◽  
Jel Codes ◽  
The Great Depression ◽  
Us Economy ◽  
The Us ◽  
The New Deal

Abstract Eggertsson (2012, American Economic Review, 102, 524–55) finds that when the nominal interest rate hits the zero lower bound, the aggregate demand (AD) curve becomes upward-sloping and supply-side policies that reduce the natural rate of output, such as the New Deal implemented in the 1930s, are expansionary. His analysis is restricted to a conventional equilibrium where the AD curve is steeper than the aggregate supply (AS) curve. Recent research, however, demonstrates that an alternative equilibrium arises if the AD curve is flatter than the AS curve. In that case, the same policies become contractionary. In this article, I allow for both possibilities, and let data decide which equilibrium the US economy actually resided in during the Great Depression. Following the work of Blanchard and Quah (1989, American Economic Review, 79, 655–73), I find that there is a high probability that New Deal policies were contractionary. (JEL codes: E32, E52, E62, N12).

scholarly journals Technological Progress, Globalization, and Secular Stagnation

2018 ◽  
Vol 7 (1) ◽  
pp. 59-100 ◽  
Author(s):  
Milenko Popović
Keyword(s):  
World Economy ◽  
Aggregate Demand ◽  
Careful Analysis ◽  
Developed Countries ◽  
Supply Side ◽  
Critical Survey ◽  
Technological Advancement ◽  
Secular Stagnation ◽  
Dual Economy ◽  
The Usa

AbstractAfter the 2008 crisis, despite economic recovery that started in 2009, the world economy has experienced a downward shift of its growth path and a consequent decline. As shown at the beginning of this paper, this shift and growth rate stagnation are totally attributable to the economic dynamics in developed economies, the USA and the EU. Explanations of this phenomenon can be divided into two large groups: explanations that belong to the demand side and those that belong to the supply side. The aim of this paper is to give a critical survey of the most important explanations for the ongoing growth stagnation in developed countries and consequently in the entire world economy. This ongoing prolonged stagnation can only be explained by looking at both, the demand and supply sides of the explanation, and particularly by taking a closer look at the interaction between aggregate demand and aggregate supply. In other words, secular stagnation manifests itself as a problem of the limitation of long run growth of aggregate demand. However, in order to explain the causes of those demand limitations, we have to undertake a careful analysis of the supply side dynamics, especially the dynamics of innovations, which bring us to circular and cumulative causation. In order to explain the numerous consequences of this stagnation and to solve some important puzzles, like the productivity paradox for example, a special emphasis is given to the analysis of deindustrialization and the consequent strange reoccurrence of a dual economy within most developed countries during the period of the IT revolution and hyper-globalization. It will also be shown that this new dual economy presents serious limitations for further technological advancement and economic development, quite contrary to the old dualism which contributed to an acceleration of economic growth.

The Macroeconomics of Demonetization: Theory and Some Conjectures

2019 ◽  
Vol 8 (2) ◽  
pp. 118-143
Author(s):  
Subhasankar Chattopadhyay
Keyword(s):  
Price Level ◽  
Jel Classification ◽  
Inflation Expectations ◽  
Supply Side ◽  
Common People ◽  
Paper Money ◽  
Long Run ◽  
Short Run ◽  
E 52 ◽  
Permanent Increase

The withdrawal of high-denomination paper money in India—popularly termed ‘demonetization’—has generated interest among common people to understand what the usual macroeconomic consequences of such one-time monetary shock are. This article conjectures (a) that such unanticipated supply-side replacement of paper money of higher denominations may lead to a currency ‘trap’ in the short run and a permanent increase in the hoarding of lower denomination currencies in the long run and (b) that the effect on the GDP in the medium run can be ambiguous in a simple IS-LM framework once the effects of variable price level and changing inflation expectations are captured through the presence of an informal sector. JEL Classification: E 12, E 26, E 44, E 52

After the Panic: Are Financial Crises Demand or Supply Shocks? Evidence from International Trade

2020 ◽  
Vol 2 (4) ◽  
pp. 509-526 ◽  
Author(s):  
Felipe Benguria ◽  
Alan M. Taylor
Keyword(s):  
Open Economy ◽  
Financial Crises ◽  
Aggregate Demand ◽  
Small Open Economy ◽  
Supply Side ◽  
Supply Shocks ◽  
Crisis Events ◽  
Empirical Tests ◽  
Negative Shock ◽  
Research And Policy

Are financial crises a negative shock to aggregate demand or supply? This is a fundamental question for research and policy making. Arguments for stimulus usually presume demand-side shortfalls; arguments for tax cuts or structural reform look to the supply side. Resolving the question requires models with both mechanisms, and empirical tests to tell them apart. We develop a small open economy model, where a country is subject to deleveraging shocks that impose binding credit constraints on households and/or firms. These financial crisis events leave distinct statistical signatures in the time series record that divide sharply between each type of shock. Empirical analysis reveals a clear picture: after financial crises the dominant pattern is that imports contract, exports hold steady or even rise, and the real exchange rate depreciates. History shows financial crises are predominantly a negative shock to demand. (JEL F14, F31, F41, G01, N10, N20, N70)

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).

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