Robert Torrens on Say's Law and the General Glut

This paper analyzes how Robert Torrens's system of prices is applied to the aggregate economy. His personal interpretation of Say's Law is articulated with a numerical illustration and the Hawkins-Simon conditions to exemplify how the correct supply of the ingredients of capital is presented as a necessary condition for the full clearing of markets. Next, the possible causes of a shortage in effectual demand are discussed. The quantitative illustrations developed by Torrens are carefully reviewed to show how the monetary factors play a crucial role during the general glut, as well as the appropriate policy measures to stabilise the economy. The final comments reflect on the originality of Torrens's theoretical work.

Macroeconomics: the workings of the whole economy.

As a first step in analysing the workings of the aggregate economy and offering explanations for macroeconomic phenomena, this chapter constructs a simple model of the flow of income within the economy and uses it to explain what determines the level of that flow. The multiplier effect, the level of aggregate demand, the equilibrium level of national income, policies to control unemployment, inflation, the quantity theory of money, economic growth and its costs are then discussed.

Quantifying the Gap Between Equilibrium and Optimum under Monopolistic Competition*

Equilibria and optima generally differ in imperfectly competitive markets. Although this is well understood theoretically, it is unclear how large the welfare distortions are in the aggregate economy. Do they matter quantitatively? To answer this question, we develop a multisector monopolistic competition model with endogenous firm entry and selection, productivity, and markups. Using French and UK data, we quantify the gap between the equilibrium and optimal allocations. We find that inefficiencies in the labor allocation and entry between sectors, as well as inefficient selection and output per firm within sectors, generate welfare losses of about 6%–10% of GDP.

Economic dynamics under heterogeneous adaptive learning: aggregate economy sufficient conditions for stability

We provide sufficient conditions for stability of a linear structurally heterogeneous economy under heterogeneous learning of agents, extending the results of Honkapohja and Mitra (2006), Kolyuzhnov (2011), and Bogomolova and Kolyuzhnov (2019). Sufficient conditions for stability under heterogeneous mixed RLS/SG learning for four classes of models: models without lags and with lags of the endogenous variable and with t or t-1- dating of expectations, are provided for the cases of the diagonal structure of the shock process behaviour or the heterogeneous RLS learning and are presented in terms of structural heterogeneity and are independent of heterogeneity in learning. The results are based on the negative diagonal dominance approach and are provided, first, in terms of the existence of the weights for aggregation of endogenous variables and of expectations across agents, interrelated in a special way, and then in terms of the E-stability of a suitably defined aggregate economy. The fundamental nature of the approach adopted in the paper allows one to apply its results to a vast majority of the existing and prospective linear and linearized economic models (including estimated DSGE models) with adaptive learning of agents.

Dynamic Models of the Creative Industries’ Behaviour

The aim of the paper is to analyse the models describing the development of the Creative Industries in Slovakia. Creative industries are described as the industrial components of the economy in which creativity is an input and content or intellectual property is the output. The creative industries have therefore appeared to be newly represented as a significant and rapidly growing set of industries; an important sector, in other words, for policy consideration. Based on the following findings, we can conclude that the second model is precisely predicting the relationship between the growth in the creative industries and in the aggregate economy in Slovakia. With improved cultural statistics, also a more developed and theoretically better founded analysis would be possible. We therefore see our article primarily as a much-needed step towards developing statistical tools in empirical cultural policy on a consistent basis.

Business cycle synchronization across U.S. states

We use wavelet analysis to conclude that individual U.S. states’ business cycles are very well synchronized. We also find evidence of a strong and significant correlation between business cycle dissimilitudes and the distance between each pair of states, consistent to gravity type mechanisms where distance affects trade. Trade, in turn, increases business cycle synchronization, while a higher degree of industry specialization is associated with a higher dissimilitude of the state cycle with the aggregate economy. Finally, there is evidence that business cycle dissimilitudes have been decreasing with time, consistent with the previous findings coupled with the idea that information and communications technology make distances smaller.

Homoclinic and Heteroclinic Motions in Economic Models with Exogenous Shocks

In this study, we theoretically prove the presence of homoclinic and heteroclinic motions in the dynamics of economic models perturbed with exogenous shocks. An illustrative example based on the Kaldor model of the aggregate economy is presented.

Understanding entry and exit: a business cycle accounting approach

This paper considers a model of firm dynamics to study how well aggregate shocks account for fluctuations in the entry and exit of establishments. To do this, I construct measures of aggregate technology, labor and investment shocks. Under reasonable parameters, the model indicates that labor shocks (and not technology or investment shocks) best account for cyclical fluctuations in entry and exit rates. Moreover, this has had significant implications for the aggregate economy, as entry and exit have made output and hours more volatile and persistent.