Components Of Aggregate Demand Research Articles

What can SVAR models tell us about the impact of Monetary Policy shocks on Aggregate Demand components and Inflation in Egypt?

What can SVAR models tell us about the impact of Monetary Policy shocks on Aggregate Demand components and Inflation in Egypt?

Demand and growth regimes of the BRICs countries – the national income and financial accounting decomposition approach and an autonomous demand-led growth perspective

We contribute to the recent debate in post-Keynesian economics (PKE), comparative political economy (CPE) and international political economy (IPE) on growth regimes. The paper presents an analysis of changes in demand and growth regimes in the BRICs countries, Brazil, Russia, India, and China, after the Global Financial Crisis and the Great Recession of 2007–2009. It discusses and applies two approaches: a first one based on national income and financial accounting decomposition and a second one based on the Sraffian Supermultiplier (SSM) growth model, distinguishing the dynamics of autonomous expenditure growth from those of the induced components of aggregate demand. It is argued that the SSM approach provides the bridge between the traditional approach based on national income and financial accounting decomposition and the analysis of growth drivers, both in PKE as well as in CPE and IPE. This is illustrated by pointing out some changes in the underlying political economy and economic policy growth drivers in each of the countries.

Macroeconomic impact of an international fishery regulation on a small island country

This paper examines the macroeconomic impact of regulating tuna fishing on a small island economy that relies heavily on tourism and fishing for its foreign exchange earnings. While there is scientific consensus to limit the use of drifting fish aggregating devices (dFADs) worldwide, there is no agreement on their optimal number at sea. Resolution 23/02, adopted by the Indian Ocean Tuna Commission (IOTC) in February 2023, proposed a 72-day moratorium on dFADs, but this resolution has met with resistance from many contracting parties, including developing countries. To understand the reasons for this resistance, a recursive, multi-sectoral dynamic general equilibrium model is developed for the Republic of Seychelles, a small tuna-dependent country. The model assesses the short- and medium-term macroeconomic impacts of a seasonal dFAD closure for the Indian Ocean tuna fishery. The analysis suggests that a 12% decline in canned tuna exports would result in a −8.8% deviation from the real gross domestic product trend after seven years. Such an impact would have far-reaching effects on the domestic economy, affecting all components of aggregate demand. Consequently, the economy would become more dependent on tourism, which has shown its vulnerability during the recent pandemic crisis. The study highlights the importance of considering social and economic aspects in sustainable fisheries management and provides insights into the potential consequences of dFAD regulations for small island economies.

قياس وتحليل مكوّنات دالّة الطلب الكينزية وأثرها على النموّ الاقتصادي ( العراق حالة دراسية ) للمدّة 2000- 2020

As known that, Iraqi economy rely significantly on oil export, therefore this economy consider to be addiction to oil. Oil sector finance the most government expenditure. Aggregate demand in Iraq depends on government expenditure in turn government expenditure depends on foreign trade. The research highlight on components of aggregate demand in Iraqi economy and in what extent those components effect on the growth of GDP. Modern econometrics methods was used to analysis and test the relationship between dependents variables which represented by aggregate demand components and independent variable which represented by GDP growth and their conformity to the Keynesian model. The research concluded that there is distortion in aggregate demand components in effect to the GDP growth.

Regimes de crescimento nos países centrais e periféricos: uma análise econométrica, 1980-2018

ABSTRACT We explore structural differences in growth patterns and income distribution between central and peripheral countries. We provide dimensions that account for the structural limitations that dependent positions have in the peripheries and semi-peripheries. We conducted an analysis through different estimates of panel data models for 35 central and peripheral countries for the period 1980-2018. In particular, in addition to making the usual estimates of the components of aggregate demand, we include three variables that we consider representative of the dynamics that capital accumulation takes in the periphery: participation in global value chains, levels of foreignization of economies and labor productivity differentials.

La evolución reciente de la inversión en España desde una perspectiva macroeconómica

RationaleCyclical fluctuations in investment are usually sharper than fluctuations in other components of aggregate demand. This article aims to analyse, based on an econometric model, the role played by interest rates, demand and agents’ confidence (the drivers traditionally studied in the literature) in the behaviour of investment under such atypical cyclical circumstances as those derived from the pandemic and the energy crisis.Takeaways•The results show that investment responds negatively to interest rate rises, while enhanced agents’ confidence and greater demand have the opposite effect.•In the absence of new shocks, the bulk of the impact of interest rates on investment occurs with a lag of several quarters, whereas agents’ confidence and demand operate with shorter lags. Given these lags, the interest rate increases and the decline in confidence which took place in 2022 appear to have had a negative effect on investment in 2023, partially offset by the positive impact of the buoyancy of demand recorded last year.•In order to analyse the changes in investment, the effects deriving from any shocks that may arise this year, including those deriving from the variables analysed in this article and other shocks not addressed in this model, should be added to the above-mentioned effects.

The Role of Internalization of Discount Factor on Households’ Behavior Using DSGE Model

Abstract This study attempts to examine the behavior of households in the Iranian economy within the framework of a dynamic stochastic general equilibrium model with the changes made in the endogenous discount factor. To this end, this study will review the existing economic literature to introduce two dynamic stochastic general equilibrium models for the economy and define two scenarios: The first model is: the endogenous discount factor. The second model: the endogenous discount factor without internalization. Considering the second-order unconditional moments observed in the two models, we can say that the calculation of the equilibrium dynamics by solving the log-linear approximation associated with a set of equilibrium conditions provides obvious and defensible results. The predictions of both models indicate upward fluctuations in the consumption, output and investment variables. The model also predicts that the components of aggregate demand are in the direction of the trade cycle, and there is a correlation between the variables and GDP. Predicting the correlation of the model’s variables can be justified by the assumption of clear preferences and technologies. On the other hand, the main finding of this study is that in the second model, by changing the endogenous discount factor during the intermittent business cycles, the dynamic paths are almost the same. Still, the fluctuations and correlations of some components of aggregate demand will be different from the first model.

Investment, autonomous demand and long-run capacity utilization: an empirical test for the Euro Area

This paper reviews and empirically tests the validity of the Sraffian Supermultiplier model (SSM) and the modified Neo-Kaleckian model after the inclusion of autonomous components of aggregate demand. First, we theoretically assess whether the SSM may constitute a complex variant of the Neo-Kaleckian model. In this sense, it is shown that results compatible with the SSM can be obtained by implementing a set of mechanisms in a modified Neo-Kaleckian model. Second, the paper empirically tests the main implications of the models in the Euro Area, based on Eurostat data. In particular, the discussion outlines the short and long-run relation between autonomous demand and output, by testing cointegration and causality with a VECM model. Moreover, the role accounted by both theories to the rate of capacity utilization is empirically assessed, through a time-series estimation of the Sraffian and Neo-Kaleckian investment functions. While confirming the theoretical relation between autonomous demand and output in the long run, the results also show that capacity utilization still plays a key role in the short-run adjustment mechanism.

TÜRKİYE’DEKİ MALİYE POLİTİKASI UYGULAMALARININ MALİ ETKİ ANALİZİ PERSPEKTİFİNDEN DEĞERLENDİRİLMESİ

Fiscal policy, which has attracted attention with the Keynesian doctrine and is frequently applied by governments, affects the components of aggregate demand through instruments such as taxes, public expenditures and borrowing and it affects economy in macro terms. The mentioned effect mechanism is realized through the budget balance. Policy makers try to eliminate the ongoing economic instability by applying expansionary or contractionary fiscal policy applications according to the conjuncture of the country's economy. Which fiscal policy application will be applied in an economy depends on the size and direction of the impact of the policy instruments on the economy. Here financial impact is a convenient analysis tool that provides an integrated representation of the impact level. In this study, the change in the total demand created by the fiscal policy practices applied in our country in the 1982-2019 period is tried to be revealed with the fiscal impact analysis.

Determinants of Private Investment in the Agricultural Sector of Mozambique (2003-2017)

Shortly after independence, Mozambique's economy was characterized predominantly by a public investment over private investment until roughly 1986. In this period, the public sector was seen as the main economic agent, centralizing most of the available resources. Bearing in mind that investment is one of the main components of aggregate demand and source of long-term economic growth, its fluctuations affect significantly the overall functioning of an economy and agriculture in particular. It's in this perspective the study comes in to unfold and understand the major determinants of the private investment in agriculture, as well as the constraints that represent the main challenges to invest in this sector due to the scarcity of capital. The study carried out an analysis of a theoretical approaches from exploratory, bibliographic combined with quantitative method based on the macroeconomic models (the neoclassical model, the flexible accelerator model, and the options model) to address the question of the study. And to achieve our objectives, the sample referred to the period of 2003-2017 and the choice of that period is associated, among several factors the consistency and availability of data on the variables included in the model such as the real GDP; GDP of the agrarian sector; public investment (government spending on infrastructure, electricity, water, between others); real interest rate; inflation rate (a variable capturing the effects of uncertainty from macroeconomic instability on the level of investments) and arable land. The results showed that the agrarian sector is influenced by the wealth produced from engineering sector (infrastructure). Keywords: Determinants, Investment, Private Investment, Agricultural Sector, Economy

Systems estimation of a structural model of distribution and demand in the US economy

Abstract This paper investigates non-cyclical, short-run relationships between income distribution and the components of aggregate demand in the US from 1963–2016. Previous studies using this ‘structural’ methodology have typically found that demand is wage-led in most large, advanced economies. However, these studies have been criticised for treating total output and the wage share as exogenous, potentially leading to simultaneity bias. This paper corrects for such possible bias as well as common shocks to the equations by using systems GMM. Surprisingly, these estimates imply that private-sector aggregate demand is more, rather than less, wage-led (or in some cases, less profit-led) compared with OLS estimates of identically specified models. This paper is also the first to provide separate estimates of non-residential and residential investment functions and to distinguish the effects of shocks to different underlying determinants of the wage share (unit labour costs and firms’ monopoly power), finding that these differ qualitatively.

The impact of the Federal Reserve System’s interest rate channel on the components of aggregate demand

Motivation: Monetary policy decisions, through the process of transmission mechanism, affect the term structure of nominal interest rates as well as other asset prices, and thus influences aggregate demand (e.g. consumer spending and business investments) and price levels through these effects. The aspect of monetary transmission to various components of aggregate demand has been relatively little studied in the literature of the subject.
 Aim: The main aim of the study is to empirically investigate the effect of the Fed’s monetary policy on major components of aggregate demand over the past 35 years. To this aim, the scale and timing of the interest rate pass-through to economic activity have been examined.
 Results: The empirical findings showed that that between 1984 and 2019, the sensitivity of consumption and investment expenditures to interest rate impulses were different. Firstly, fixed investment spending accounted for a significant part that was responsible for the response of real GDP following an interest rate shock. Secondly, in the case of personal consumption expenditures, expenses for durable goods were more sensitive to changes in the Fed’s interest rate than spending on services and nondurable goods. In this way, the study expands the existing literature by reporting the effects of the Fed’s monetary policy on major components of aggregate demand over the past 35 years

The Effects of Change in Functional Income Distribution on Aggregate Demand in Korea

Purpose - This study reviewed the demand system of the Korean economy through the impact of changes in Korea’s functional income distribution on consumption, investment, and net exports. Design/Methodology/Approach - Although most domestic research studies have identified wage-led demand systems, some research results of profit-led demand systems have also been presented. In particular, the labor income share has been on the decline since the financial crisis. Considering the situation that has turned upward since 2010, we wanted to examine the impact of changes in income distribution on aggregate demand at this time. Findings - The Korean economy is still considered to be a wage-led demand system, but it has weakened somewhat in terms of intensity. In terms of the components of aggregate demand, the consumption effect was somewhat weakened compared to the preceding study, while the investment effect was significant compared to consumption, and the net export effect was still not found to be statistically significant after the financial crisis. Research Implications - Therefore, as improving income distribution contributes to stabilizing domestic demand, the government needs to make policy efforts to break away from low-growth trends through various distribution policies such as tax cuts and subsidies to households and businesses, including self-employed.

Policy and Business Cycle Shocks: A Structural Factor Model Representation of the US Economy

We use a dynamic factor model to provide a semi-structural representation for 101 quarterly US macroeconomic series. We find that (i) the US economy is well described by a number of structural shocks between two and five. Focusing on the four-shock specification, we identify, using sign restrictions, two policy shocks, monetary and fiscal, and two non-policy shocks, demand and supply. We obtain the following results. (ii) Both supply and demand shocks are important sources of fluctuations; supply prevails for GDP, while demand prevails for employment and inflation. (ii) Monetary and fiscal policy shocks have sizable effects on output and prices, with no evidence of crowding-out of private aggregate demand components; both monetary and fiscal authorities implement important systematic countercyclical policies reacting to demand shocks. (iii) Negative demand shocks have a large long-run positive effect on productivity, consistently with the Schumpeterian “cleansing” view of recessions.

ESTIMATING THE GROSS DOMESTIC PRODUCT OF NIGERIA DURING MILITARY AND CIVILIAN REGIMES: A CHOW TEST

Gross domestic product is the commonest economic vari- able that is used to measure economic performance, either for intertemporal or international comparison. Nigeria as a country has been ruled since independence by two sets of regimes: the military and the civilian. Arguments were and still are concerned with which of the two regimes favoured the country economically. The study therefore estimates the gross domestic product of Nigeria using Chow test. The essence of Chow test is to determine if there was structural break from the point the country fully began civilian dis- pensation from the previous military regime. Using both the F statistic and the Chow test, the results show that there was indeed structural break between the military regime and the civilian regime. This result was further confirmed by the Cusum Square test that shows that the overall model was unstable before the correction. The results further show that out of five components of aggregate demand, four of the variables have coefficients higher during the civilian than the military regime. The study therefore concluded that civilian rule is better economically than military rule in Nigeria. It was recommended that politicians and politi- cal office holders should act within the ambit of the law to sustain the democracy the country is currently enjoying.

Demand-led growth and functional income distribution in Brazil from 1952 to 2017

Abstract This work aims to investigate the effect of changes in functional income distribution on growth in Brazil from 1952 to 2017. Following the neo-Kaleckian and Supermultiplier growth and distribution theories, it is possible to obtain two types of such effects. First, a level effect, predicted by both models, establishes a direct relationship of the wage share on the level of output through changes in the components of aggregate demand. Secondly, a growth effect occurs only in the neo-Kaleckian models and is the causal relationship between the wage share and output growth through the rate of capital accumulation. We analyzed the presence of these two effects in the empirical literature and found no evidence of a long run growth regime through capital accumulation as would be expected in the neo-Kaleckian model. However, we find empirical evidence that investment is an induced component of demand as is expected in the Supermultiplier model.

Investment, Profits and Federal Reserve's Ultra-Low Interest Rate Policy

In recent decades, investment has been lackluster despite high returns on capital, high valuations measured by Tobin’s Q, and low interest rates. In this paper, we provide an account of weak investment after the Great Recession by explaining why investment has grown decreasingly responsive to interest rates, and by focusing on the role of profits in determining investment. This proposal overcomes some limitations of secular stagnation theories and contributes to accounting for monetary policies’ limited effectiveness in boosting the investment component of aggregate demand. Given stock price distortions, measures of profitability and profits less reliant on stock market valuations should be used to explain investment dynamics in the recent macroeconomic environment.

Analysis of the Impact of Changes in the Functional Distribution of Income on Aggregate Demand

Analysis of the Impact of Changes in the Functional Distribution of Income on Aggregate Demand

Heterogeneous unit labor costs and profit margins in an economy with vintage capital: an amended neo-Kaleckian model

Post-Keynesian literature studying the impact of functional income distribution on economic activity and growth focuses on indirect demand effects (i.e., the consequences of real wage changes on aggregate demand components). The purpose of this article is to explore two points neglected by this literature. First, it ignores the direct supply effects corresponding to the impact of real wage changes on firms’ current profitability. Second, it does not explicitly take into account capital heterogeneity as a consequence of embodied technical progress. We, therefore, analyze the properties of a neo-Kaleckian model that includes both labor productivity differences between firms and the necessary condition of positive profits to engage in production. We show that the positive impact of real-wage increases on effective demand forces some firms to stop production because they become unprofitable. Moreover, the increase in effective demand can be impeded by the decrease in the capacity of profitable firms. Therefore, a recovery of economic activity through wage increases reaches its limits when profitable firms are at full capacity. The model also highlights the importance of technical competition and its role in firms’ behavior regarding capital replacement.

Aggregate Demand and Macroeconomic Dynamics in the EU: A Comparative Analysis of Old and New Member States

The paper looks at the macroeconomic dynamics in old and new EU Member States interpreted in light of the changes in the ag­gregate demand. The focus is on examining changes in individual components of aggregate demand over time, their relative importance, and their contribution to real GDP growth rates. This reveals the distinct features of old and new EU Member States in terms of the cost dependence of GDP growth and the resulting macroeconomic consequences.