Chapter 12 Basics of Dynamic Model 友学经济学院
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Topics to be Discussed o Basic principles of building macroeconomic model o Micro basis of macroeconomics g Choices of households ☆ Choices of firms o Introduction to labor market 友学经济学院
Topics to be Discussed Basic principles of building macroeconomic model Micro basis of macroeconomics ❖Choices of households ❖Choices of firms Introduction to labor market
12. 1 Basic Principles of Building Macroeconomic mode o Static economics Static analysis: exogenous variables+parameters==>endogenous variables o Comparative static economics o Comparative static analysis: exogenous variables==>endogenous variables o Dynamic economics s Dynamic analysis: endogenous variables 友学经济学院
12.1 Basic Principles of Building Macroeconomic Model Static economics ❖ Static analysis: exogenous variables+parameters==>endogenous variables Comparative static economics ❖ Comparative static analysis：exogenous variables==>endogenous variables Dynamic economics ❖ Dynamic analysis: endogenous variables
12. 1 Basic Principles of Building Macroeconomic model o Dynamic model in microeconomics .Consider variables time sequence and the time and process needed for variables adjustment &Cobweb theory D Qr=a-p Q3=-y+ 友学经济学院
Dynamic model in microeconomics ❖Consider variables’ time sequence and the time and process needed for variables adjustment ❖Cobweb theory 12.1 Basic Principles of Building Macroeconomic Model t D Qt = a − p = − + t−1 S Qt p D t S Qt = Q
12.1 Basic Principles of Building Macroeconomic model o Dynamic model in macroeconomics .Income-expenditure model C+I c=a+by yt-byt1=1+ 友学经济学院
Dynamic model in macroeconomics ❖Income-expenditure model 12.1 Basic Principles of Building Macroeconomic Model yt=ct+It ct=a+byt-1 yt -byt-1 =It+a
Macroeconomic Mode/9 12. 1 Basic Principles of Buildi o Macroeconomic model is a highly abstract description to the real economy. Throughout the model-building process, it's very important to grasp the primary determinants (variables) and ignore the secondary ones o As to the same economic phenomenon,there can be different conclusions drawn from different models o Is there a consistent standard to assess models? 友学经济学院
12.1 Basic Principles of Building Macroeconomic Model Macroeconomic model is a highly abstract description to the real economy. Throughout the model-building process, it’s very important to grasp the primary determinants (variables) and ignore the secondary ones. As to the same economic phenomenon，there can be different conclusions drawn from different models. Is there a consistent standard to assess models?
12.1 Basic Principles of Building Macroeconomic Model o Basic principles of building macroeconomic model .Empirical data test Micro compatibility 友学经济学院
12.1 Basic Principles of Building Macroeconomic Model Basic principles of building macroeconomic model ❖ Empirical data test ❖ Micro compatibility
12.1 Basic Principles of Building Macroeconomic Model o Basic principles of building macroeconomic model &s Empirical data test Economic data are objective record for the real economic operation Econometricians test theory models with varieties of mathematical or statistical methods to show to what extent these models are consistent with the real world, and predict quantitatively economic growth in future 友学经济学院
12.1 Basic Principles of Building Macroeconomic Model Basic principles of building macroeconomic model ❖ Empirical data test Economic data are objective record for the real economic operation Econometricians test theory models with varieties of mathematical or statistical methods to show to what extent these models are consistent with the real world, and predict quantitatively economic growth in future
12.1 Basic Principles of Building Macroeconomic Model ⊙ Examp|e: 今 GDP Time Series Y t-15t-25 Y 2t-L .s Implications: output of this year is influenced by outputs of past years. How much is the influence? How about the significance? .s There can be four different possibilities 友学经济学院
12.1 Basic Principles of Building Macroeconomic Model Example ： ❖ GDP Time Series ❖ Implications ：output of this year is influenced by outputs of past years. How much is the influence ? How about the significance? ❖ There can be four different possibilities ： ( , , , ) t Yt 1 Yt 2 Yt i Y f − − − =
12. 1 Basic Principles of Building Macroeconomic model ⊙ Autoregressive o Moving Average, MA x=+e1+Be1-1+e o Autoregressive-Moving Average, ARMA 1=a1-1+e1+Ben-1+et2+ o Integrated Autoregressive Moving Average, ARIMA AY =aAY-+e, +Be,_+re,_2+ △Y.=Y-Y 复具济器院
12.1 Basic Principles of Building Macroeconomic Model Autoregressive Moving Average，MA Autoregressive-Moving Average，ARMA Integrated AutoregressiveMoving Average，ARIMA Yt = aYt−1 + et = + + + + t t t−1 t−2 Y e e e = + + + + t t−1 t t−1 t−2 Y aY e e e 1 1 1 2 − − − − = − = + + + + t t t t t t t t Y Y Y Y a Y e e e