Supply-Side Macroeconomics / John F. Helliwell.

Format:

Book

Author/Creator:

Helliwell, John F.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1995.

NBER working paper series no. w1995

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Summary:

This paper tests New Classical and Keynesian explanations of

output determination within an encompassing "factor utilization"

model wherein the output decision by producers is modelled as the

choice of a utilization rate for employed factors. In this

encompassing model, the ratio of actual to normal output (with

the latter defined by a nested CES vintage production function

with capital, energy and employment as factor inputs) is

explained by unexpected sales (a Keynesian element), abnormal

profitability (one component of which is the Lucas "price

surprise" effect), and abnormal inventories.

Results using Canadian data show that the Keynesian and New

Classical elements contribute explanatory power, as does the

production-function-based measure of normal output, while each of

these partial models is strongly rejected in favour of the

encompassing model. The highly structured factor utilization

model is also seen to fit better than an unstructured VAR model.

U.S. data confirm the results, and show that there are

significant effects from abnormal demand, profitability and

inventory levels even if the labour and capital components of

normal output are defined using hours and utilized capital rather

than employment and the capital stock. The results are also

confirmed using alternative output (and hence input) concepts,

using a translog function instead of a CES function to define

normal output, and using data for several other major industrial

countries.

Notes:

Print version record

August 1986.