Abstract
The primary objective of this paper is to present to economists and students an efficient method for deriving long-run projections of many interrelated economic variables. Several useful equilibrium concepts are given precise definition. A simple set of supply and demand equations is used to demonstrate that mathematical analysis of dynamic econometric models is a powerful tool for projecting future time paths of certain economic variables. Short-run or impact multipliers and long-run multipliers are derived. Impact multipliers relate to the estimated effects of a change in the exogenous variables on the values of the endogenous variables in the current period. Long-run multipliers describe the estimated effects of a once-and-for-all change or continuous changes in exogenous variables on projected values of the endogenous variables. These multipliers are potentially useful in policy appraisal and long-run analyses.
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