Back Matter

Back Matter

Hamid Faruqee, Douglas Laxton, Bart Turtelboom, Peter Isard, and Eswar Prasad
Published Date:
May 1998
  • ShareShare
Show Summary Details

Work on a more extensive disaggregation of the developing and transition economies is under way, and changes in the core set of industrial countries and country groups will be required in the context of European Economic and Monetary Union.

A no-Ponzi-game condition—that asymptotically the real interest rate must exceed the growth rate—is often imposed in optimizing models that are used for policy analysis; see, for example, the discussions of basic infinite-horizon models and overlapping-generations models in Blanchard and Fischer (1989). In MULTIMOD, the difference between the steady-state levels of the real interest rate and the growth rate depends on the parameters of the production function, the rate of depreciation, the rate of time preference, and the level of world government debt.

Among the earliest of these models, each focusing on only a single economy, were Klein and Goldberger (1955), Klein and others (1961), and Duesenberry and others (1965). Bryant, Hooper, and Mann (1993) provides descriptions of, and references to, a number of the multicountry macroeconometric models that are currently in use; see also Edison, Marquez, and Tryon (1987), Gagnon (1991), Helliwell and others (1990), McKibbin and Sachs (1991), and Meredith (1989).

The procedure for making a system of estimated equations consistent with an externally generated baseline forecast essentially involves solving for, and imposing, a set of residuals under which the estimated model generates the baseline solution. Strictly speaking, the World Economic Outlook baseline projects only over a five-year horizon. The manner in which the baseline path is extended beyond this horizon is discussed in Section III.

Indeed, in many contexts the effects of shocks, measured as deviations from the baseline path, are largely independent of the specific baseline forecast.

Loosely speaking, the main criteria for incorporating an estimated equation specification are that the specification should be based to a large extent on underlying theory and should not generate an unrealistic degree of macroeconomic variability when embedded into the MULTIMOD system of equations. Thus, in comparison with models for which short-term forecasting accuracy is a high priority, MULTIMOD has been estimated with a relatively low willingness to sacrifice theoretical foundations in order to obtain better goodness of fit.

See Helliwell (1993). Model-consistent expectations appear to be relatively more attractive for asset markets, and adaptive expectations more popular for markets with greater inertia in price adjustment.

For example, the Federal Reserve Board's FRB/Global Model (see Levin, Rogers, and Tryon, 1997) relies on backward-looking (“limited-information”) expectations as its base case, although it can also be simulated under the assumption of model-consistent expectations.

Among those who blame misleading economic theories for the “great inflation” in the United States in the late 1960s and 1970s, Taylor (1996, p. 184) notes that during that period, “the idea that there is a long-run Phillips curve trade-off began to appear in textbooks, newspapers, and even the Economic Report of the President; the inflation cost of an overheated economy, according to this theory, was simply a higher rate of inflation, not rising inflation.” Studies by economic historians, such as De Long (1996), add support for this view by rejecting the alternative hypothesis that supply shocks (especially oil price shocks) were the main source of the rise in inflation. Taylor also emphasizes the coincidence in timing between the monetary disinflation of the 1980s and the incorporation into macroeconomics of more reasonable models of expectations and price adjustment, attributable largely to research started by Lucas (1972).

By intrinsic macroeconomic dynamics, we mean those dynamics that may be assumed to be invariant to the types of policy experiments that are being considered. Of course, for enormous changes in policy rules, contract length as well as the degree of nominal indexation may change, and it then becomes difficult to determine precisely what is structure. However, by assuming that inflation expectations partly reflect the model-consistent solution, MULTIMOD at least makes some attempt to control for the first-order effects of the Lucas critique.

“The departure from strict superneutrality reflects the fact that MULTIMOD embodies an “inflation tax.”

In this regard, analysis of how rational agents form expectations when it takes time to learn about the nature of various policy changes and other exogenous shocks remains an important area for additional research.

In this respect, the methodology for solving MULTIMOD Mark III is similar to that for solving the Bank of Canada's Quarterly Projection Model—see Laxton and Tetlow (1992) and other references cited in Section III.

As noted earlier and elaborated in Section V, inflation expectations are only partially forward looking.

See Masson and Symansky (1992), Masson and Turtelboom (1997), and the discussion in Section VIII below.

In Mark III, the group comprises six high-income oil exporters—Kuwait, Libya, Oman, Qatar, Saudi Arabia, and United Arab Emirates—corresponding to the World Economic Outlook group of capital-exporting developing countries. The work program for the near future includes redefining the aggregation scheme for the nonindustrial economies and enhancing the models of their macroeconomic behavior.

A modified version of the Mark II model disaggregates the main developing country bloc into four separate groups: Western Hemisphere, Africa, the group of four newly industrialized economies, and an aggregate of the other non-oil developing countries. See Bayoumi, Hewitt, and Symansky (1995) and the discussion in Section VIII below.

The group of net creditor developing countries is assumed to produce only oil.

The discount rate that enters the calculations of human and nonhuman wealth includes the exogenous rate of population growth and the after-tax interest rate applicable to saving (the nominal riskless rate of interest plus a premium that reflects both the credit risk on personal income and the probability of death).

As discussed in Section V, the issue of whether fiscal policy has non-Ricardian effects continues to be actively debated as an empirical proposition. The rationale for adopting the Mark III consumption-saving specification in a model used for policy analysis comes partly from the appeal of the theoretical framework, but also reflects a balancing of the prospective welfare costs of type 1 and type 2 policy errors. Fiscal policy actions based on erroneous prescriptions from a non-Ricardian model when the “true model” was Ricardian would presumably tend to be less costly than fiscal policy inaction based on erroneous analysis with a Ricardian model when the “true model” was non Ricardian.

Measures of nominal and real effective exchange rates are also constructed in MULTIMOD using the IMF's Information Notice System weights (for a description of these weights, see McGuirk (1987) and Zanello and Desruelle (1997)).

For the developing country blocs, the public and private sectors are essentially treated as an aggregate, with no separation between government spending and private spending and no explicit treatment of taxes.

One of the modified versions of MULTIMOD (see Section VIII) includes indirect taxes as well as the direct taxes on labor and capital incomes.

For some purposes, it is appropriate to “turn off” the tax rate reaction function and to allow debt to accumulate under a constant basic tax rate.

See the discussion in Masson, Symansky, and Meredith (1990), pp. 11–12.

As with the fiscal policy feedback rules, the parameters of these monetary policy reaction functions are imposed, with parameter values set at levels that make the model stable.

We plan to undertake such an analysis over the next year in conjunction with regrouping some of the industrial countries in the context of European Economic and Monetary Union.

To the extent that the Mark III and Mark II models embody the same reaction functions, comparisons of “standard simulations” of the two models can be revealing. However, for models with forward-looking expectations, which take account inter alia of the nature of policy behavior, the optimal forms of monetary policy reaction functions are model specific, and one can question the meaningfulness of comparing standard simulations of models with either different optimal policy reaction functions or common suboptimal reaction functions.

Neither of the developing country models contains a monetary sector.

These assumptions, which are retained from the Mark I model, are consistent with the paradigm that the Organization of Petroleum Exporting Countries sets the price of oil and serves as residual supplier. It may be noted that inventories of oil are not explicit in the model; changes in inventories are implicitly included in consumption.

The paradigm is a crop harvest or production from mines, where individual producers are too small to influence the price and where the marginal costs of expanding contemporaneous supply are infinite.

Implicitly, any actual outputs and exports of primary commodities by the industrial countries are aggregated with their out-puts and exports of the main composite goods.

Debt interest payments are calculated net of interest receipts on international reserve assets.

Neither the data nor the model is adequate for considering other factors relevant to the sectoral allocation of investment.

This description is oversimplified, of course, because it takes as given the steady-state levels of saving and investment. In general, the steady-state values of saving, investment, and most other variables depend on exogenously specified assumptions about certain variables and key parameters; see Section III.

In moving to a modeling system with parallel dynamic and steady-state equations, Mark III has followed in the footsteps of other national and two-region models that have been designed for policy analysis. For examples of such models and some relevant applications, see Laxton and Tetlow (1992), Black and others (1994), Bryant (1996), Coletti and others (1996), Faruqee, Laxton, and Symansky (1997), Bryant and Zhang (1996a, 1996b), and Black and others (1997).

This simplification is made for expositional purposes. In Mark III, the rate of return on net foreign assets is a blend of the rate of return on a short-term debt instrument and the rate of return on a long-term debt instrument.

If the real interest rate was less than the growth rate, there would be no real costs, and indeed there would be potential benefits, from delaying fiscal consolidation. In fact, if the real interest rate were less than the growth rate and independent of fiscal policy, a government could reduce tax rates, issue debt instruments, and allow growth in its tax base to eliminate the debt. For this reason, most theoretical optimizing models used for policy analysis impose a no-Ponzi-game condition; see, for reference, the discussion in Blanchard and Fischer (1989).

The real long-term interest rate in the steady state is assumed to be 5.25 percent, reflecting an assumption that the equilibrium term premium is 100 basis points.

This capability reflects advances in solution methodology.

The TROLL programs used to create SSMOD and DYNMOD for Mark III build up the world models by combining the codes of individual country models. This means that it is straightforward to simulate and study the individual country SS and DYN models in isolation. Obviously, this approach can save considerable time and computer resources in analyzing shocks where there are only second-order feedback effects across countries.

The horizon over which variables converge to steady-state values in the baseline solution of the model may differ from the time it takes to achieve convergence in the shock-minus-control values of the same variables. In the Mark III baseline, real interest rates and some real growth rates reach their steady-state values within 10 or 20 years, while demographics take more than half a century to settle down to a zero rate of population growth in all countries.

See Juillard and Laxton (1996), and Juillard and others (1998) for a comparison of the properties of this algorithm with those of conventional first-order methods.

Thus, the Phillips curve is vertical in the long run, and any attempt to hold unemployment below its natural rate will result in accelerating inflation; see Friedman (1968). The incorporation of a supply side into what was essentially a Keynesian paradigm is sometimes referred to as the “neoclassical synthesis.”

In early versions of macroeconomic models, it was quite common to set Φ equal to zero because model builders did not have access to robust solution algorithms for solving models where agents were assumed to have some knowledge of the underlying structure and policy process.

The simple representation in Figure 1 abstracts from any lagged inflation terms.

This type of convexity was an important feature of the original curve introduced by Phillips (1958) and discussed by Lipsey (1960) and several others. Macklem (1996) and Clark and Laxton (1997) provide a brief history of convexity in the Phillips curve and explain why it was overshadowed by other issues.

If the degree of convexity in the short-run Phillips curve is independent of the long-term inflation objective, as in Mark III, then it will still be true that the long-run Phillips curve is vertical and the average unemployment rate will be independent of the target inflation rate. However, if convexity in the short-run Phillips curve becomes greater at very low inflation rates, as suggested by Akerlof, Dickens, and Perry (1996), then there may be a permanent trade-off between inflation and unemployment at low inflation rates.

See Mankiw (1988) and De Long and Summers (1988).

See also Isard and Laxton (1996), Clark and Laxton (1997), Debelle and Vickery (1997), Laxton, Rose, and Tambakis (1998), and Faruqee, Laxton, and Rose (1998). Studies by Laxton, Rose, and Tetlow (1993), Laxton, Meredith, and Rose (1995), Bean (1996), Turner (1995), Clark, Laxton, and Rose (1995, 1996), Macklem (1996), Fisher, Mahadeva, and Whitley (1996), Dupasquier and Ricketts (1997), and McDonald (1997) have also found evidence of asymmetries in the inflation process for several industrial countries using different empirical specifications.

This functional form is a slight generalization of the one employed in the TRYM model—see Australia (1996)—and is very similar to the function that was estimated in Chadha, Masson, and Meredith (1992).

See Fuhrer and Moore (1995) for a derivation of a model with backward- and forward-looking components in a linear Phillips curve framework.

For discussions of the analytics of disinflation in models with backward- and forward-looking components, see Buiter and Miller (1985) and Chadha, Masson, and Meredith (1992). Equation (9) includes both real and nominal rigidities. For a summary of the recent literature on the microfoundations of the Phillips curve and the importance of both nominal and real rigidities, see Ball and Mankiw (1994).

Clark, Laxton, and Rose (1996) and others have shown that the Michigan Survey of one-year-ahead inflation expectations provides significant information content in quarterly inflation equations.

This first step is based on an assumption that most of the variation in long-term bond yields is a result of variation in long-term inflation expectations. The measure of the equilibrium world real interest rate term is meant to account for the trend increase (low frequency variation) in the equilibrium real interest rate that has been a result of the rise in world government debt;for details, see Debelle and Laxton (1997). Goodfriend (1993) and Barr and Campbell (1996) argue that most of the high-frequency variation in long-term bond yields is driven by inflation scares rather than by historical movements in the ex ante real rate of interest.

Reliable survey measures of inflation expectations for other countries span substantially shorter time periods than the data for the United States.

The standard error of this estimate is 0.18. Users of MULTIMOD may vary this parameter in simulation mode.

The term “policy credibility” refers here to the speed with which inflation expectations adjust in response to announced changes in policy obxjectives for inflation.

The estimation strategy employed here is considerably different from what has been employed in the recent U.S. academic literature on Phillips curves. The latter literature imposes a very strong form of the rational expectations hypothesis, where agents do not make serially correlated forecast errors even in small samples. In structural models, this extreme form of rational expectations breaks down quickly with modest amounts of uncertainty, which explains why these models are rejected overwhelmingly by less restricted time-series representations of the data. For evidence of autocorrelated forecast errors and historical regime shifts in the inflation process, see Evans and Wachtel (1993), Laxton, Ricketts, and Rose (1994), and Ricketts and Rose (1995).

Recent studies focusing on the behavior of long-term interest rates suggest that market participants in some cases revise their expectations of long-term inflation very slowly in response to observed inflation performance. For example, Gagnon (1996) shows that the Fisher equation holds surprisingly well if long moving averages of past inflation are used to measure long-term inflation expectations.

Using a multiple regime-switching model, Laxton, Ricketts, and Rose (1994) show that, because of historical inflation bias, it may take the monetary authorities a considerable length of time to establish credibility in a low-inflation regime and that, along the transition path, there will be a persistent period of excess supply until credibility has been established. However, in any one particular draw, inflation expectations will converge slowly and then suddenly credibility will improve when the time-series properties of the inflation process become consistent with the underlying policy fundamentals. This view of the importance of policy credibility can account for slow adjustment on the one hand, as well as for cases where long-term interest rates jump because market participants become convinced that the monetary authorities and democratic process are committed to low inflation. This can explain, for example, why it has taken a very long time for long-term inflation expectations in Canada to fall below rates in the United States, but how certain countries that appear to be committed to Economic and Monetary Union have experienced a very rapid decline in their long-term interest rate differentials with Germany.

Kuttner (1992, 1994) adopts a strategy that is closest to the one we follow, but he assumes that the Phillips curve has a linear specification.

The software package that was used to estimate the model was TSP.

Specifications of the derived demand for labor typically also include a real wage disequilibrium term, as in Bartolini, Razin, and Symansky (1995). However, the estimated parameter on this term is usually found to be fairly small compared with the role of the output gap, and this effect is ignored in Mark III.

The model was estimated this way because there was significant residual autocorrelation when the model was estimated with ordinary least squares in a few countries. This autocorrelation is probably a result of inconsistencies in the filtered estimates of the natural rate and potential output. In the future it would be preferable to develop model-consistent measures of these trend variables in a larger system that embodies equation (15).

The relatively low parameter estimate on the output gap for Italy presumably is not attributable to extremely low variability in the underlying unemployment rate. One possibility is that Italy has had larger shocks to the natural rate of unemployment than Japan and that the simple univariate filter that is being used to estimate potential output fails to capture the direct link from changes in the natural rate to potential output. As a consequence, we would expect that the parameter estimate on the output gap may be biased downward, and this can perhaps account for why the model doesn't fit nearly as well for Italy as it does for the other countries. In future work, we hope to develop system estimates of potential output and the natural rate that will alleviate any problems of this type.

These estimates are based on the latest available input-output tables; see the notes to Table 4.

The revival of the classical view and the Ricardian equivalence proposition was led by Barro (1974). See Barro (1989) for a more recent review.

The seminal paper is Diamond (1965); see Persson (1985) for open economy extensions. See Bernheim (1989) for a more recent review of the neoclassical approach to budget deficits.

See Jappelli and Pagano (1989) for an international comparison of age-earnings profiles (and capital market imperfections).

See Bernheim and Bagwell (1988) for a critical review on the dynastic approach.

In a survey of empirical tests for Ricardian equivalence, Seater (1993) claims that the evidence is supportive of the equivalence proposition; at the same time, however, he acknowledges that the results of various studies correlate closely with the political leanings of the investigator (p. 184). See Barro (1989) and Bernheim (1989) for opposing interpretations of the empirical evidence.

See Blanchard (1985). If the probability of death goes to zero, agents have infinite horizons.

The case of population (and productivity) growth is addressed later.

Labor supply is taken to be inelastically supplied. Hence, the labor-leisure decision is not part of the consumer's optimization problem. See Ludvigson (1996) for a recent paper on fiscal policy effects with endogenous labor supply.

The term pw(s,t) in the dynamic budget constraint reflects the efficient operation of the life insurance or annuities market. See Yaari (1965) or Blanchard (1985).

This result assumes logarithmic utility. The case of constant relative risk aversion (CRRA utility) (see also Blanchard, 1985) and the implications of different intertemporal substitution elasticities are explored in Faruqee, Laxton, and Symansky (1997).

For a given (world) real interest rate, individual human wealth can be written as


To derive aggregate variables, we simply sum over all existing generations (or dynasties). Specifically, aggregate variables, denoted by uppercase letters, are derived by integrating over all existing cohorts or generations (indexed by s):


To simplify notation, the time arguments in the equations have been dropped in the text, except where potential ambiguities may arise. The time index is reintroduced in the tables.

Blanchard (1985) examines the case of declining individual income profiles; the more realistic case of nonmonotonic (concave) earnings profiles is mentioned only in passing (footnote 75). Both cases introduce a saving-for-retirement motive and open up the possibility that the economy may be dynamically inefficient (that is, may overaccumulate capital).

As discussed later, the parameters in equation (21) are chosen such that the weighting function is assumed to be nonnegative and initially increasing; by an adding-up constraint, we also require that


Integrating up equation (23) yields the definition of the human wealth component H1:


where the following boundary condition is assumed to be satisfied: limvH1(v)e(r+p+α1)=0;H2 is derived equivalently from equation (24). Hence, disposable labor income is effectively discounted at a rate that depends on r + p + α1 and r + p + α2.

Another critical parameter affecting the degree of debt non-neutrality is the elasticity of intertemporal substitution, which determines the sensitivity of consumption to changes in interest rates. See Faruqee, Laxton, and Symansky (1997) for a discussion.

Following Lucas (1967) and Treadway (1969), installation costs are quadratic in the deviation of the investment-capital ratio from its steady-state value:


where g is the long-run growth rate, n is the long-run rate of population growth, and χ is a scale parameter in the adjustment cost function. For now, we consider the case where g = n = 0; population and productivity growth are introduced later. For convenience, we assume χ = 1 throughout this section. Investment behavior is discussed more fully in Section VI.

See also Turnovsky (1996) for a similar small open economy model (with Fisherian separability), but in the context of endogenous growth.

Assuming that F(K, L) is homogeneous-of-degree-one in its arguments, we can write the production function as LF(K/L, 1) = f(K)[≡F(K, 1)] at L = 1. Also, the following conditions are assumed to apply to guarantee the existence of an interior steady-state solution: 0limkf(K)r+δlimk0f(K). Strict concavity of f(K)—an increasing function—guarantees uniqueness.

In the case of public investment, the model would need to be revised to include the contribution of the public sector to the domestic capital stock.

With a time-varying rate of interest, the present value of labor income that comprises human wealth is given by


Differentiating this expression with respect to time yields the dynamic equation for human wealth shown in Table 6.

From the equation, permanent-income consumers who comprise 1 − λ, of the population hold all the financial wealth W in the economy. This is because agents are born without wealth and younger agents do not save (that is, accumulate wealth) initially while liquidity constrained.

By adding up, we have β ≡ a1pl(p + α1), λ1 ≡ 1 − e−(α1+p)(t−τ(t)), λ2 ≡ 1 − e−(α2+p)(t−τ(t)), where τ(t) is an index of the oldest generation still liquidity constrained at time t. By construction, λ2 > λ1, and both parameters can be greater than λ for plausible (hump-shaped) income profiles.

In terms of specific cohorts, the number of individuals (or dynasties) born as part of cohort s is a proportion of the contemporaneous population given by N(s,s) = bN(s), and the number of these individuals surviving at time t > s is given by N(s, t) = bN(s)e−p(t−s).

We now have β ≡ a1b/(b + α1), λ1 ≡ − e−(α1+b)(t−1(τ)), λ2 ≡ − e−(α2+b)(t−1(τ))

Lowercase variables with a time and a generation index refer to individual measures, whereas lowercase variables with only a time argument reflect per capita measures (in units of labor efficiency): x(t) = X(t)/L(t) = X(t)e−(n+g)t. Government spending in labor efficiency units is denoted gvt, to avoid confusion with the growth rate.

Together, the conditions for nonnegative and initially increasing income profiles imply


In reality, individuals generally experience a discontinuous fall in labor supply and wage earnings with retirement. However, given that individuals retire at different ages, the representative income profile averaged over many individuals may be approximated with a smooth function. See also Blanchard (1985) and Saint-Paul (1992).

Cross-sectional data on real labor income were readily available only for Canada and the United States. For convenience, only the U.S. data are used, although both data sets appear some-what similar.

The cohort ranges are 18–24, 25–34, 35–44, 45–54, 55–64, and 65 +.

This will certainly be the case if aggregate labor productivity growth affects absolute labor incomes for all age groups proportionately without affecting the relative (cross-sectional) distribution of income.

NLLS estimates of the vector of parameters (α, a) seek to minimize the sum of squared residuals u from the following regression: ryt = f(t, α, a) + ut, where f(.) follows from equation (46).

The imposed parameters are obtained through grid search.

The theoretical distribution also includes an asymptotic tail of (arbitrarily) old people, whereas in reality this distribution is clearly truncated at some finite maximum age. This latter issue is not too severe a problem given that the very old generations form an increasingly small (infinitesimal) proportion of the population.

As a share of the total population, the number of survivors from a generation born at time s remaining at time t is equal to be−p(t−s); with a stationary population in steady state, b = p and n = 0. Using this expression, we approximate the model's steady-state age distribution across the (discrete) age groups as shown in the table.

The calculated birth rate—defined as the relative size of new arrivals (that is, youngest cohort) as a share of the existing adult population—varied from 2½ percent to 3 percent for the United States over the sample period. The average growth rate for the adult population was about ½ of 1 percent over the same period, implying a death rate of 2−2½ percent.

The estimate of 0.41 here relates to the proportion of consumption that is interest sensitive and needs to be multiplied by a factor of (1 − λ) before comparison with estimates of the elasticity of substitution for aggregate consumption. Patterson and Pesaran (1992) and Attanasio and Weber (1993) place the latter in the range of 0.1 to 0.3; Hall (1988) argues that it may be lower than 0.2.

The tax cut takes the form of a lowering of the basic tax rate by 2 percentage points of nominal GDP for five years, holding constant the tax rate on capital income; it thus amounts essentially to a lowering of the tax rate on labor income.

In the full model simulations, the world real interest rate is endogenous and determined by equilibrating world savings and investment. Bayoumi and Laxton (1994) consider the effects of fiscal policy when real interest rate differentials depend on the level of government debt.

It is assumed that the revenue function has already been maximized vis-à-vis other variable production factors.

The growth rate of GDP is a composite variable comprising technological progress and labor force dynamics.

Technically, qt is the Lagrange multiplier on the constraint in equation (49).

This model is a special case of a more general investment function that includes imperfectly competitive goods markets and imperfect capital markets. Substituting equations (51), (53), and the first derivative of (47) into equation (52) gives an equation that can be estimated in the following “flexible-accelerator” form:

where the parameters κ are functions of the rate of depreciation, the growth rate of the economy, the tax rate on capital income, and the value of χ in the adjustment-cost function. While the presence of the quadratic term in equation (54) indicates the presence of adjustment costs, the absence of an aggregate cash-flow measure and the aggregate business sector debt implies that there are no distortions (tax-induced or other) that would lead to meaningful financial policies (that is, preference for equity over debt finance, or paying dividends). See Bond and Meghir (1994) for an indepth discussion and empirical implementation and Epstein and Denny (1983) for a rigorous analysis of the flexible-accelerator specification of the adjustment-cost model.

To maintain the consistency of the national income accounts in MULTIMOD, the marginal product of capital is also used in evaluating household wealth. In particular, since the marginal product of capital is larger than the real interest rate and is used to calculate the share of capital income in total income, it needs to be incorporated in the wealth terms used in consumption behavior as described in Section V, to make sure that aggregate factor income is consistent with the value of production.

The literature provides a range of estimates. Summers (1981) estimates χ to equal 16.1. Eberly (1997) estimates linear and nonlinear investment equations on firm-level and aggregate data for 11 industrial countries. Based on aggregate measures constructed from the firm-level data in her sample, she finds estimates for χ between 1.4 and 3. Her instrumental variable estimates for firm-level equations are between 1.75 for Belgium and 9 for the Netherlands. Cummins, Hassett, and Oliner (1997) provide estimates on the order of 5–10 based on firm-level data in the United States.

In the first year, the short-term real interest rate falls because the expected increase in the price level more than offsets the increase in the nominal short-term interest rate.

We do not elaborate here on international trade in oil and non-oil primary commodities, which was discussed in Section II.

The OECD has compiled input-output tables for the seven major industrial countries and also for Australia, Denmark, and the Netherlands. The latest versions of these tables (1990 for most countries) were used to compute import propensities for the components of domestic absorption as well as for exports. The last set of numbers reflects exports of goods and services that have a significant content of imported inputs.

Potential output growth rates were computed using smoothed levels of potential output obtained from the World Economic Outlook database.

In the core version of Mark III, this term is turned off in simulation mode. Future extensions of the model will incorporate endogenous total factor productivity growth, along the lines of the analysis in Bayoumi, Coe, and Helpman (1996).

Measures of nominal and real effective exchange rates based on direct trade shares are also computed in the model. These weights take into account competition in third markets and also the differences among countries in the relative importance of international trade. The methodology for computing the weights is similar to that of the IMF's Information Notice System described in McGuirk (1987) and Zanello and Desruelle (1997).

See Meredith (1997) for details on the derivation of these weights.

The model contains equations for adjusted exports that are equal to unadjusted exports, determined using the export equations described above, plus, for each country, a coefficient times the excess relative to baseline of world import volumes over export volumes. This coefficient reflects the share of the country in total world trade in goods and nonfactor services excluding oil. The remaining discrepancy in nominal trade flows is allocated across countries in a similar fashion by adjusting import prices.

As described in Masson, Symansky, and Meredith (1990), for all countries and country groups except the main developing country bloc, estimates of net foreign asset positions are constructed by cumulating measured current account balances. The net foreign asset position of the main developing country bloc is then constructed as a residual.

The Mark III version of MULTIMOD has also been extended to allow for endogenous total factor productivity—see Bayoumi, Coe, and Laxton (1998).


    AdamsCharles and David T.Coe1990A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United States,Staff PapersInternational Monetary Fund, Vol. 37(June) pp. 23293.

    AkerlofGeorgeWilliamDickens and GeorgePerry1996The Macroeconomics of Low Inflation,Brookings Papers on Economic Activity: 1Brookings Institution, pp. 176.

    ArmstrongJ.R.BlackD.Laxton and D.RoseA Robust Method for Simulating Forward-Looking Models,Journal of Economic Dynamics and Controlforthcoming.

    AttanasioO.P. and G.Weber1993Consumption Growth, the Interest Rate, and Aggregation,Review of Economic Studies Vol. 60(July) pp. 63199.

    Australia Commonwealth Treasury1996Documentation of the Treasury Macroeconomic (TRYM) Model of the Australian Economy (Canberra, Australia: Commonwealth Treasury).

    BallLaurence M. and GregoryMankiw1994A Sticky-Price Manifesto,NBER Working Paper No. 4677 (Cambridge, Massachusetts: National Bureau of Economic Research).

    BarrDavid G. and John Y.Campbell1996Inflation, Real Interest Rates, and the Bond Market: A Study of UK Nominal and Index-Linked Government Bond Prices,NBER Working Paper No. 5821 (Cambridge, Massachusetts: National Bureau of Economic Research).

    BarroR.J.1974Are Government Bonds Net Wealth?Journal of Political Economy Vol. 82(November/December) pp. 1095117.

    BarroR.J.1989The Ricardian Approach to Budget Deficits,Journal of Economic Perspectives Vol. 3(Spring) pp. 3754.

    BartoliniLeonardoAsafRazin and StevenSymansky1995G-7 Fiscal Restructuring in the 1990s: Macro-economic Effects,Economic Policy Vol. 20(April) pp. 11146.

    BayoumiTamimDavid T.Coe and DouglasLaxton1998Liberating Supply: Technological Innovation in a Multicountry Econometric Model” (unpublished; Washington: International Monetary Fund).

    BayoumiTamimDavid T.Coe and ElhananHelpman1996R&D Spillovers and Global Growth,IMF Working Paper 96/47 (Washington: International Monetary Fund).

    BayoumiTamimDanielHewitt and StevenSymansky1995MULTIMOD Simulations of the Effects on Developing Countries of Decreasing Military Spending,” in North-South Linkages and International Macroeconomic Policy ed. by DavidVines and DavidCurrie (Cambridge; New York: Cambridge University Press).

    BayoumiTamim and DouglasLaxton1994Government Deficits, Debt, and the Business Cycle,” in Deficit Reduction—What Pain What Gain? ed. by William B.P.Robson and William M.Scarth (Toronto: C.D. Howe Institute).

    BayoumiTamimDanielHewitt and JeraldSchiff1993Economic Consequences of Lower Military Spending: Some Simulation Results,IMF Working Paper 93/17 (Washington: International Monetary Fund,March).

    BeanCharles1996The Convex Phillips Curve and Macroeconomic Policymaking Under Uncertainty” (unpublished; London: HM Treasury).

    BernheimB.D.1989A Neoclassical Perspective on Budget Deficits,Journal of Economic Perspectives Vol. 3(Spring) pp. 5572.

    BernheimB.D. and K.Bagwell1988Is Everything Neutral?Journal of Political Economy Vol. 96(April) pp. 30838.

    BertolaGiuseppe1988Adjustment Costs and Dynamic Factor Demands: Investment and Employment Under Uncertainty(Ph.D. dissertation;Cambridge, Massachusetts: Massachusetts Institute of Technology).

    BertolaGiuseppe and Ricardo J.Caballero1990Kinked Adjustment Costs and Aggregate Dynamics,” in NBER Macroeconomics Annual ed. by OlivierBlanchard and StanleyFischer (Cambridge, Massachusetts: MIT Press).

    BlackRichardV.CassinoA.DrewE.HansenB.HuntD.Rose and A.Scott1997The Forecasting and Policy System: The Core Model,Research Paper No. 43 (Wellington, New Zealand: Reserve Bank of New Zealand).

    BlackRichardD.LaxtonD.Rose and R.Tetlow1994The Steady-State Model: SSQPM,The Bank of Canada's New Quarterly Projection ModelBank of Canada Technical Report No. 72 Part 1.

    BlanchardOlivier J.1985Debt, Deficits and Finite Horizons,Journal of Political Economy Vol. 93(April) pp. 22347.

    BlanchardOlivier J. andStanleyFischer1989Lectures on Macroeconomics (Cambridge, Massachusetts: MIT Press).

    BlanchardOlivier J. and D.Quah1989The Dynamic Effects of Aggregate Supply and Demand Disturbances,American Economic Review Vol. 79(September) pp. 65573.

    BlanchardOlivier J. and Lawrence F.Katz1997What We Know and Do Not Know About the Natural Rate of Unemployment,” in Journal of Economic Perspectives Vol. 11(Winter) pp. 5172.

    BlanchardOlivier J. and LawrenceSummers1986Hysteresis and the European Unemployment Problem,” in NBER Macroeconomics Annual ed. by S.Fischer (Cambridge, Massachusetts; London, United Kingdom: MIT Press).

    BondStephen and CostasMeghir1994Dynamic Investment Models and the Firm's Financial Policy,Review of Economic Studies Vol. 61(April) pp. 197222.

    BosEduardMy T.VuEarnestMassiah and Rudolfo A.Bulatao1994World Population Projections 1994–95 Edition (Baltimore, Maryland: Published for the World Bank by the Johns Hopkins University Press).

    BoucekkineR.1995An Alternative Methodology for Solving Nonlinear Forward-Looking Models,” in Journal of Economic Dynamics and Control Vol. 19No. 4 pp. 71134.

    BryantRalph1996Alternative Rules for Monetary Policy and Fiscal Policy in New Zealand: A Preliminary Assessment of Stabilization Properties,Brookings Discussion Papers in International Economics,No. 127(July).

    BryantRalph andLongZhang1996aIntertemporal Fiscal Policy in Macroeconomic Models: Introduction and Major Alternatives,Brookings Discussion Papers in International Economics,No. 123(June).

    BryantRalph1996bAlternative Specifications of Intertemporal Fiscal Policy in a Small Theoretical Model,Brookings Discussion Papers in International Economics,No. 124(June).

    BryantR.P.Hooper and C.Mann eds.1993Evaluating Policy Regimes: New Research in Empirical Macroeconomics (Washington: Brookings Institution).

    BuiterWillem H.1988Death, Birth, Productivity Growth and Debt Neutrality,Economic Journal Vol. 98(June) pp. 27993.

    BuiterWillem H. and MarcusMiller1985Costs and Benefits of an Anti-Inflationary Policy: Questions and Issues,” in Inflation and Unemployment: Theory Experience and Policy-Making ed. by V.Argy and J.Nevile (London: George Allen & Unwin).

    CallenTim and DougLaxton1998A Small Macro Model of the Australian Inflation Process with Endogenous Policy Credibility” (unpublished; Washington: International Monetary Fund).

    CalvoGuillermo A.1983Staggered Prices in a Utility-Maximizing Framework,Journal of Monetary Economics Vol. 12(September) pp. 38398.

    ChadhaBankimPaulMasson and GuyMeredith1992Models of Inflation and the Costs of Disinflation,Staff PapersInternational Monetary Fund, Vol. 39(June) pp. 395431.

    ClarkPeter B. and DouglasLaxton1997Phillips Curves, Phillips Lines and the Unemployment Costs of Overheating,IMF Working Paper 97/17 (Washington: International Monetary Fund).

    ClarkPeter B. and DouglasLaxton andRose1996Asymmetry in the U.S. Output-Inflation Nexus,Staff PapersInternational Monetary Fund, Vol. 43(March) pp. 21651.

    ClarkPeter B. and DouglasLaxton andRose1995Capacity Constraints, Inflation, and the Transmission Mechanism: Forward-Looking Versus Myopic Policy Rules,IMF Working Paper 95/75 (Washington: International Monetary Fund).

    ColettiD.B.HuntDavidRose and RobertTetlow1996The Dynamic Model: QPM,” in The Bank of Canada's New Quarterly Projection Model Part 3 Technical Report No. 75 (Ottawa: Bank of Canada).

    CumminsJasonKevinHassett and StephenOliner1997Investment Behavior, Observable Expectations, and Internal Funds” (unpublished; New York: New York University).

    DebelleGuy and DouglasLaxton1997Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States,Staff PapersInternational Monetary Fund, Vol. 44(June) pp. 24982.

    DebelleGuy and JamesVickery1997Is the Phillips Curve a Curve? Some Evidence and Implications for Australia” (unpublished; Sydney, Australia: Reserve Bank of Australia, Economic Research Department).

    De LongJ.B.1996America's Only Peacetime Inflation: The 1970s,NBER Historical Working Paper No. 084 (Cambridge, Massachusetts: National Bureau of Economic Research).

    De LongJ.B. andL.H.Summers1988How Does Macroeconomic Policy Affect Output?Brookings Papers on Economic Activity: 2Brookings Institution, pp. 43380.

    DiamondPeter A.1965National Debt in a Neoclassical Growth Model,American Economic Review Vol. 55(December) pp. 112650.

    DixitA. and R.S.Pindyck1994Investment Under Uncertainty (Princeton, N.J.: Princeton University Press).

    DuesenberryJames and others eds.1965The Brookings Quarterly Econometric Model of the United States (Chicago: Rand McNally).

    DupasquierC. and N.Ricketts1997Non-linearities in the Output-Inflation Relationship,paper presented at the Bank of Canada Conference on Price Stability Inflation Targets and Monetary Policy.

    EberlyJanice1997International Evidence on Investment and Fundamentals,European Economic Review Vol. 41(June) pp. 105578.

    EdisonH.J.J.R.Marquez and R.W.Tryon1987The Structure and Properties of the Federal Reserve Board Multicountry Model,Economic Modelling Vol. 4(April) pp. 115315.

    EpsteinLarry G. and Michael G.Denny1983The Multivariate Flexible Accelerator Model: Its Empirical Restrictions and an Application to U.S. Manufacturing,Econometrica Vol. 51(May) pp. 64774.

    EricssonNeil and JohnIrons1995The Lucas Critique in Practice: Theory Without Evidence,” in Macroeconomics: Developments Tensions and Prospects ed. by K.Hoover (Boston: Kluwer Academic).

    EvansMartin and PaulWachtel1993Inflation Regimes and the Sources of Inflation Uncertainty,Journal of Money Credit and Banking Vol. 25(August) pp. 475511.

    EvansPaul1991Is Ricardian Equivalence a Good Approximation?Economic Inquiry Vol. 29(October) pp. 62444.

    FairRay and JohnTaylor1983Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models,Econometrica Vol. 51(July) pp. 116985.

    FaruqeeHamidDouglasLaxton and DavidRose1998Inflation and Unemployment in Europe and North America: Asymmetry Versus Hysteresis” (unpublished; Washington: International Monetary Fund).

    FaruqeeHamidDouglasLaxton and SteveSymansky1997Government Debt, Life-Cycle Income and Liquidity Constraints: Beyond Approximate Ricardian Equivalence,Staff PapersInternational Monetary Fund, Vol. 44(September) pp. 37482.

    FisherP.G.L.Mahadeva and J.D.Whitley1996The Output Gap and Inflation-Experience at The Bank of England,paper presented at a meeting of BIS Model BuildersNovember.

    FischerStanley1977Long-term Contracts, Rational Expectations, and the Optimal Money Supply Rule,Journal of Political Economy Vol. 85(February) pp. 191205.

    FischerStanley> 1994Modern Central Banking,” in The Future of Central Banking ed. by F.Capie and others (Cambridge, United Kingdom; New York, N.Y.: Cambridge University Press).

    FordRobert and DouglasLaxton1995World Public Debt and Real Interest Rates,IMF Working Paper 95/30 (Washington: International Monetary Fund).

    FordRobert and DavidRose1989Estimates of the NAIRU Using an Extended Okun's Law,Working Paper No. 89–3 (Ottawa: Bank of Canada).

    FriedmanMilton1968The Role of Monetary Policy,American Economic Review Vol. 58(March) pp. 117.

    FuhrerJeffrey C. and George R.Moore1995Monetary Policy Trade-Offs and the Correlation Between Nominal Interest Rates and Real Output,American Economic Review Vol. 85(March) pp. 21939.

    GagnonJoseph E.1991A Forward-Looking Multi-country Model for Policy Analysis: MX3,Economic and Financial Computing Vol. 1(Winter) pp. 31161.

    GagnonJoseph E.> 1996Long Memory in Inflation Expectations: Evidence from International Financial Markets,International Finance Discussion Paper No. 538 (Washington: United States Board of Governors of the Federal Reserve, International Finance Division).

    GoodfriendMarvin1993Interest Rate Policy and the Inflation Scare Problem: 1979–1992,Economic QuarterlyFederal Reserve Bank of Richmond, Vol. 79(Winter) pp. 124.

    HaasRichard and PaulMasson1986MINIMOD: Specification and Simulation Results,Staff PapersInternational Monetary Fund, Vol. 33(December) pp. 72267.

    HallRobert E.1988Intertemporal Substitution in Consumption,Journal of Political Economy Vol. 96(December) pp. 33057.

    HallRobert E.1993Comment,” in Evaluating Policy Regimes: New Research in Empirical Macroeconomics ed. by R.BryantP.Hooper and C.Mann (Washington: Brookings Institution), pp. 41625.

    HallRobert E.GuyMeredithP.Bagnoli and Y.Durand1990INTERMOD 1.1: A G-7 Version of the IMF's Multimod,Economic Modelling Vol. 7(January) pp. 362.

    HodrickRobert J. and Edward C.Prescott1981Post-War U.S. Business Cycles: An Empirical Investigation,Carnegie-Mellon Discussion Paper No. 451 (Pittsburgh: Carnegie-Mellon University).

    HollingerP.1996The Stacked-Time Simulator in TROLL: A Robust Algorithm for Solving Forward-Looking Models,paper presented at the Second International Conference on Computing in Economics and Finance (Geneva, Switzerland).

    International Monetary Fund1996World Economic Outlook May 1996: A Study by the Staff of the International Monetary Fund (Washington).

    IsardPeter and DouglasLaxton1996Strategic Choice in Phillips Curve Specification: What If Bob Gordon Is Wrong?” (unpublished; Washington: International Monetary Fund).

    JappelliT. and M.Pagano1989Consumption and Capital Market Imperfections: An International Comparison,American Economic Review Vol. 79(December) pp. 1088105.

    JuillardMichel1996DYNARE: “A Program for the Resolution and Simulation of Dynamic Models with Forward Variables Through the Use of a Relaxation Algorithm,CEPREMAP Working Paper No. 9602 (Paris, France).

    JuillardMichel1996A Robust and Efficient Method for Solving Nonlinear Rational Expectations Models,IMF Working Paper No. 96/106 (Washington: International Monetary Fund).

    JuillardMichelPeterMcAdam and HopePioro1998An Algorithm Competition: First-Order Iterations Versus Newton-Based Techniques,Journal of Economic Dynamics and Control.

    KeynesJohn M.1936The General Theory of Employment, Interest and Money (New York: Harcourt, Brace and World).

    KleinLawrence and ArthurGoldberger1955An Econometric Model of the United States 1929–1952 (Amsterdam: North-Holland).

    KleinLawrenceR.J.BallA.Hazelwood and P.Vandome1961An Econometric Model of the United Kingdom (Oxford: Blackwell).

    KuttnerKenneth N.1992Monetary Policy with Uncertain Estimates of Potential Output,Economic PerspectivesReserve Bank of Chicago(January–February) pp. 215.

    KuttnerKenneth N.1994Estimating Potential Output as a Latent Variable,Journal of Business and Economic Statistics Vol. 12(July) pp. 36168.

    LaffargueJ.P.1990“Resolution d'un Modele Macroeconomique avec Anticipations Rationnelles”Annales d'Economie et de StatistiqueInstitut National de la Statistique et des Etudes, Vol. 17(January–March) pp. 97119.

    LaxtonDouglas and EswarPrasad1997Possible Effects of European Monetary Union on Switzerland: A Case Study of Policy Dilemmas Caused by Low Inflation and the Nominal Interest Rate Floor,IMF Working Paper 97/23 (Washington: International Monetary Fund).

    LaxtonDouglasGuyMeredith and DavidRose1995Asymmetric Effects of Economic Activity on Inflation: Evidence and Policy Implications,Staff PapersInternational Monetary Fund, Vol. 42(June) pp. 34474.

    LaxtonDouglasNicholasRicketts and DavidRose1994Uncertainty, Learning and Policy Credibility,” in Economic Behavior and Policy Choice Under Price Stability (Ottawa: Bank of Canada).

    LaxtonDouglasDavidRose and DemosthenesTambakis1998The U.S. Phillips Curve: The Case for Asymmetry,forthcomingIMF Working Paper (Washington: International Monetary Fund).

    LaxtonDouglasDavidRose and RobertTetlow1993Is the Canadian Phillips Curve Nonlinear?Working Paper 93–7 (Ottawa: Bank of Canada).

    LaxtonDouglas and RobertTetlow1992Government Debt in an Open Economy,Technical Report No. 58 (Ottawa: Bank of Canada).

    LayardRichardStephenNickell and RichardJackman1991Unemployment: Macro-economic Performance and the Labour Market (Oxford; New York: Oxford University Press).

    LevinAndrewJohnRogers and RalphTryon1997Evaluating International Economic Policy with the Federal Reserve's Global Model,Federal Reserve Bulletin (Washington: Federal Reserve), pp. 797817.

    LipseyR.G.1960The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom 1862–1957: A Further Analysis,Economica new series Vol. 27(February) pp. 131.

    LucasRobert E.Jr.1967Adjustment Costs and the Theory of Supply,Journal of Political Economy Vol. 75(August) pp. 32134.

    LucasRobert E.Jr.1972Expectations and the Neutrality of Money,Journal of Economic Theory Vol. 4(April) pp. 10324.

    LucasRobert E.Jr.1976Econometric Policy Evaluation: A Critique,” in The Phillips Curve and Labor Markets ed. by KarlBrunner and Allan H.MeltzerCarnegie-Rochester Conference Series on Public Policy Vol. 1 (Amsterdam: North-Holland).

    LucasRobert E.Jr.1988On the Mechanics of Economic Development,Journal of Monetary Economics Vol. 22(July) pp. 342.

    LudvigsonSydney1996The Macroeconomic Effects of Government Debt in a Stochastic Growth Model,Journal of Monetary Economics Vol. 38(August) pp. 2445.

    MacklemTiff1996Asymmetry in the Monetary Transmission Mechanism: What Can We Learn From VARS?” (unpublished; Ottawa: Bank of Canada).

    MacklemTiffDavidRose and RobertTetlow1995Government Debt and Deficits in Canada: A Macro Simulation Analysis,Working Paper 95–4 (Ottawa: Bank of Canada).

    MankiwN. Gregory1988Comment” on De Long and SummersBrookings Papers on Economic Activity: 2Brookings Institution, pp. 48185.

    MassonPaul R.1987The Dynamics of a Two-Country Minimodel Under Rational Expectations,Annales d'Economie et de Statistique pp. 3769.

    MassonPaul R.StevenSymanskyRichardHaas and MichaelDooley1988MULTIMOD: A Multi-Region Econometric Model,Staff Studies for the World Economic Outlook (Washington: International Monetary Fund,July) pp. 50104.

    MassonPaul R. and StevenSymansky1992Evaluating the EMS and EMU Using Stochastic Simulations,” in Macroeconomic Policy Coordination in Europe: The ERM and Monetary Union ed. by RayBarrell and JohnWhitley (London: Sage Publications).

    MassonPaul R. and StevenSymansky1990MULTIMOD MARK II: A Revised and Extended Model IMF Occasional Paper No. 71 (Washington: International Monetary Fund).

    MassonPaul R. and Bart G.Turtelboom1997Characteristics of the Euro, the Demand for Reserves, and Policy Coordination Under EMU,” in EMU and the International Monetary System ed. by P.MassonT.Krueger and B.Turtelboom (Washington: International Monetary Fund).

    McDonaldIan M.1997The Australian Inflation Target and the Shape of the Short-Run Phillips Curve” (unpublished; Melbourne, Australia: University of Melbourne).

    McGuirkAnne Kenny1987Measuring Price Competitiveness for Industrial Country Trade in Manufactures,IMF Working Paper 87/34 (Washington: International Monetary Fund).

    McKibbinW.J. and J.D.Sachs1991Global Linkages: Macroeconomic Interdependence and Cooperation in the World Economy (Washington: Brookings Institution).

    MeredithGuy1989INTERMOD 2.0: Model Specification and Simulation Properties,Working Paper 89–7 (Ottawa, Canada: Working Group on International Macroeconomics, Department of Finance).

    MeredithGuy1991Changes to MULTIMOD Since the July 1990 IMF Occasional Paper No. 71” (unpublished; Washington: International Monetary Fund).

    MeredithGuy1997Competitiveness Weights in MULTIMOD” (unpublished; Washington: International Monetary Fund).

    PattersonKerry D. and BahramPesaran1992Intertemporal Elasticity of Substitution Consumption in the United States and the United Kingdom,Review of Economics and Statistics Vol. 74(November) pp. 57384.

    PerssonTorsten1985Deficits and Intergenerational Welfare in Open Economies,Journal of International Economics Vol. 19(August) pp. 6784.

    PhillipsA.W.1958The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957,Economica Vol. 25(November) pp. 28399.

    RickettsNicholas and DavidRose1995Inflation, Learning, and Monetary Policy Regimes in the G-7 Economies,Working Paper 95–6 (Ottawa: Bank of Canada).

    RomerChristina and DavidRomer1989Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz,” in NBER Macroeconomics Annual ed. by O.Blanchard and S.Fischer (Cambridge, Massachusetts; London, United Kingdom: MIT Press).

    RomerPaul M.1990Endogenous Technological Change,Journal of Political Economy Vol. 98(October) pp. S71S102.

    Saint-PaulGilles1992Fiscal Policy in an Endogenous Growth Model,Quarterly Journal of Economics Vol. 107(November) pp. 124359.

    SeaterJohn T.1993Ricardian EquivalenceJournal of Economic Literature Vol. 31(March) pp. 14290.

    SummersLawrence H.1981Taxation and Corporate Investment: a q-Theory Approach,Brookings Papers on Economic Activity: 1Brookings Institution, pp. 67127.

    SummersLawrence H.1988Should Keynesian Economics Dispense with the Phillips Curve?” in Unemployment Hysteresis and the Natural Rate Hypothesis ed. by RodCross (Oxford, United Kingdom; New York: Blackwell).

    TanziVito and DomenicoFanizza1995Fiscal Deficits and Public Debt in Industrial Countries, 1970–1994,IMF Working Paper 95/49 (Washington: International Monetary Fund).

    TaylorJohn1980Aggregate Dynamics and Staggered Contracts,Journal of Political Economy Vol. 88(February) pp. 123.

    TaylorJohn1993Discretion Versus Policy Rules in Practice,Carnegie-Rochester Conference Series on Public Policy Vol. 39(December) pp. 195220.

    TaylorJohn1996How Should Monetary Policy Respond to Shocks While Maintaining Long-Run Price Stability?—Conceptual Issues,” in Achieving Price Stability: A Symposium (Kansas City, Missouri: Federal Reserve Bank of Kansas City).

    TaylorJohn1969A General Equilibrium Approach to Monetary Theory,Journal of Money Credit and Banking Vol. 1(February) pp. 1529.

    TreadwayArthur B.1969On Rational Entrepreneurial Behaviour and the Demand for Investment,Review of Economic Studies Vol. 36(April) pp. 22740.

    TurnerDavid1995Speed Limit and Asymmetric Effects from the Output Gap in the Seven Major Countries,OECD Economic Studies Vol. 24(1995/1) pp. 5788.

    TurnovskyStephen1996Fiscal Policy, Growth, and Macroeconomic Performance in a Small Open Economy,Journal of International Economics Vol. 40 pp. 4166.

    WeilPhilippe1989Overlapping Families of Infinitely-Lived Agents,Journal of Public Economics Vol. 38(March) pp. 18398.

    YaariMenahem E.1965Uncertain Lifetime, Life Insurance, and the Theory of the Consumer,Review of Economic Studies Vol. 32(January) pp. 13750.

    ZanelloAlessandro and DominiqueDesruelle1997A Primer on the IMF's Information Notice System,IMF Working Paper 97/71 (Washington: International Monetary Fund).

Recent Occasional Papers of the International Monetary Fund

164. MULTIMOD Mark III: The Core Dynamic and Steady-State Models, by Douglas Laxton, Peter Isard, Hamid Faruqee, Eswar Prasad, and Bart Turtelboom. 1998.

163. Egypt: Beyond Stabilization, Toward a Dynamic Market Economy, by a staff team led by Howard Handy. 1998.

162. Fiscal Policy Rules, by George Kopits and Steven Symansky. 1998.

161. The Nordic Banking Crises: Pitfalls in Financial Liberalization? by Burkhard Dress and Ceyla Pazarbaşioğlu. 1998.

160. Fiscal Reform in Low-Income Countries: Experience Under IMF-Supported Programs, by a staff team led by George T. Abed and comprising Liam Ebrill, Sanjeev Gupta, Benedict Clements, Ronald McMorran, Anthony Pellechio, Jerald Schiff, and Marijn Verhoeven. 1998.

159. Hungary: Economic Policies for Sustainable Growth, by Carlo Cottarelli, Thomas Krueger, Reza Moghadam, Perry Perone, Edgardo Ruggiero, and Rachel van Elkan. 1998.

158. Transparency in Goverment Operations, by George Kopits and Jon Craig. 1998.

157. Central Bank Reforms in the Baltics, Russia, and the Other Countries of the Former Soviet Union, by a staff team led by Malcolm Knight and comprising Susana Almuina, John Dalton, Inci Otker, Ceyla Pazarbaşioğ, Arne B. Petersen, Peter Quirk, Nicholas M. Roberts, Gabriel Sensenbrenner, and Jan Willem van der Vossen. 1997.

156. The ESAF at Ten Years: Economic Adjustment and Reform in Low-Income Countries, by the staff of the International Monetary Fund. 1997.

155. Fiscal Policy Issues During the Transition in Russia, by Augusto Lopez-Claros and Sergei V. Alexashenko. 1998.

154. Credibility Without Rules? Monetary Frameworks in the Post-Bretton Woods Era, by Carlo Cottarelli and Curzio Giannini. 1997.

153. Pension Regimes and Saving, by G.A. Mackenzie, Philip Gerson, and Alfredo Cuevas. 1997.

152. Hong Kong, China: Growth, Structural Change, and Economic Stability During the Transition, by John Dodsworth and Dubravko Mihaljek. 1997.

151. Currency Board Arrangements: Issues and Experiences, by a staff team led by Tomas J.T. Balino and Charles Enoch. 1997.

150. Kuwait: From Reconstruction to Accumulation for Future Generations, by Nigel Andrew Chalk, Mohamed A. El-Erian, Susan J. Fennell, Alexei P. Kireyev, and John F. Wilson. 1997.

149. The Composition of Fiscal Adjustment and Growth: Lessons from Fiscal Reforms in Eight Economies, by G.A. Mackenzie, David W.H. Orsmond, and Philip R. Gerson. 1997.

148. Nigeria: Experience with Structural Adjustment, by Gary Moser, Scott Rogers, and Reinold van Til, with Robin Kibuka and Inutu Lukonga. 1997.

147. Aging Populations and Public Pension Schemes, by Sheetal K. Chand and Albert Jaeger. 1996.

146. Thailand: The Road to Sustained Growth, by Kalpana Kochhar, Louis Dicks-Mireaux, Balazs Horvath, Mauro Mecagni, Erik Offerdal, and Jianping Zhou. 1996.

145. Exchange Rate Movements and Their Impact on Trade and Investment in the APEC Region, by Takatoshi Ito, Peter Isard, Steven Symansky, and Tamim Bayoumi. 1996.

144. National Bank of Poland: The Road to Indirect Instruments, by Piero Ugolini. 1996.

143. Adjustment for Growth: The African Experience, by Michael T. Hadjimichael, Michael Nowak, Robert Sharer, and Amor Tahari. 1996.

142. Quasi-Fiscal Operations of Public Financial Institutions, by G.A. Mackenzie and Peter Stella. 1996.

141. Monetary and Exchange System Reforms in China: An Experiment in Gradualism, by Hassanali Mehran, Marc Quintyn, Tom Nordman, and Bernard Laurens. 1996.

140. Government Reform in New Zealand, by Graham C. Scott. 1996.

139. Reinvigorating Growth in Developing Countries: Lessons from Adjustment Policies in Eight Economies, by David Goldsbrough, Sharmini Coorey, Louis Dicks-Mireaux, Balazs Horvath, Kalpana Kochhar, Mauro Mecagni, Erik Offerdal, and Jianping Zhou. 1996.

138. Aftermath of the CFA Franc Devaluation, by Jean A.P. Clément, with Johannes Mueller, Stephane Cosse, and Jean Le Dem. 1996.

137. The Lao People's Democratic Republic: Systemic Transformation and Adjustment, edited by Ichiro Otani and Chi Do Pham. 1996.

136. Jordan: Strategy for Adjustment and Growth, edited by Edouard Maciejewski and Ahsan Mansur. 1996.

135. Vietnam: Transition to a Market Economy, by John R. Dodsworth, Erich Spitaller, Michael Braulke, Keon Hyok Lee, Kenneth Miranda, Christian Mulder, Hisanobu Shishido, and Krishna Srinivasan. 1996.

134. India: Economic Reform and Growth, by Ajai Chopra, Charles Collyns, Richard Hemming, and Karen Parker with Woosik Chu and Oliver Fratzscher. 1995.

133. Policy Experiences and Issues in the Baltics, Russia, and Other Countries of the Former Soviet Union, edited by Daniel A. Citrin and Ashok K. Lahiri. 1995.

132. Financial Fragilities in Latin America: The 1980s and 1990s, by Liliana Rojas-Suárez and Steven R. Weisbrod. 1995.

131. Capital Account Convertibility: Review of Experience and Implications for IMF Policies, by staff teams headed by Peter J. Quirk and Owen Evans. 1995.

130. Challenges to the Swedish Welfare State, by Desmond Lachman, Adam Bennett, John H. Green, Robert Hagemann, and Ramana Ramaswamy. 1995.

129. IMF Conditionality: Experience Under Stand-By and Extended Arrangements. Part II: Background Papers. Susan Schadler, Editor, with Adam Bennett, Maria Carkovic, Louis Dicks-Mireaux, Mauro Mecagni, James H.J. Morsink, and Miguel A. Savastano. 1995.

128. IMF Conditionality: Experience Under Stand-By and Extended Arrangements. Part I: Key Issues and Findings, by Susan Schadler, Adam Bennett, Maria Carkovic, Louis Dicks-Mireaux, Mauro Mecagni, James H.J. Morsink, and Miguel A. Savastano. 1995.

127. Road Maps of the Transition: The Baltics, the Czech Republic, Hungary, and Russia, by Biswajit Banerjee, Vincent Koen, Thomas Krueger, Mark S. Lutz, Michael Marrese, and Tapio O. Saavalainen. 1995.

126. The Adoption of Indirect Instruments of Monetary Policy, by a staff team headed by William E. Alexander, Tomás J.T. Baliño, and Charles Enoch. 1995.

125. United Germany: The First Five Years—Performance and Policy Issues, by Robert Corker, Robert A. Feldman, Karl Habermeier, Hari Vittas, and Tessa van der Willigen. 1995.

124. Saving Behavior and the Asset Price “Bubble” in Japan: Analytical Studies, edited by Ulrich Baumgartner and Guy Meredith. 1995.

123. Comprehensive Tax Reform: The Colombian Experience, edited by Parthasarathi Shome. 1995.

122. Capital Flows in the APEC Region, edited by Mohsin S. Khan and Carmen M. Reinhart. 1995.

121. Uganda: Adjustment with Growth, 1987–94, by Robert L. Sharer, Hema R. De Zoysa, and Calvin A. McDonald. 1995.

120. Economic Dislocation and Recovery in Lebanon, by Sena Eken, Paul Cashin, S. Nuri Erbas, Jose Martelino, and Adnan Mazarei. 1995.

119. Singapore: A Case Study in Rapid Development, edited by Kenneth Bercuson with a staff team Robert G. Carling, Aasim M. Husain, Thomas Rumbaugh, and Rachel van Elkan. 1995.

118. Sub-Saharan Africa: Growth, Savings, and Investment, by Michael T. Hadjimichael, Dhaneshwar Ghura, Martin Miihleisen, Roger Nord, and E. Murat Uçer. 1995.

Note: For information on the title and availability of Occasional Papers not listed, please consult the IMF Publications Catalog or contact IMF Publication Services.

    Other Resources Citing This Publication