TITLE:
Keynes’ Analytical System as an Econometric Tool: Examining Macroeconomic Trends in the U.S. from 1950s to 1980s
AUTHORS:
Manuel A. R. Da Fonseca
KEYWORDS:
Macro-Econometric Modeling, Quantitative Macroeconomic Analysis, Estimation of Structural Models, Solution of Nonlinear Equations
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.10,
June
19,
2018
ABSTRACT: The initial goal of this paper is to develop the standard Keynes’ analytical system into a dynamic
macro-econometric model, which is then applied to the analysis of macroeconomic
indicators for the U.S. from
1950s to 1980s—a period marked by strong volatility of inflation, exchange
rates and commodity prices. Based on the results obtained and, in particular,
on the model’s structure and exogenous variables, it is possible to single out
the main factors that explain the macro-trends observed
in the American economy. Further, a second and more important goal is to
evaluate if a simple macro-dynamic model can be a relevant tool in empirical
analysis of macroeconomic developments. The results obtained indicate that,
although the elements of the Keynesian system are most often used in a purely theoretical
perspective, a macro-econometric model based on those elements can be
successfully used in reproducing overall macroeconomic variables in a certain
period—and the determinants
of those macro-trends can be traced to the model’s exogenous variables.