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ECONOMICS
Keynesian model and the modern economy Tregub I. (Russian Federation)
Модель Кейнса и современная экономика Трегуб И. В. (Российская Федерация)
Трегуб Илона Владимировна / Tregub Ilona - доктор экономических наук, профессор, кафедра системного анализа и моделирования экономических процессов, Финансовый университет при Правительстве Российской Федерации, г. Москва
Abstract: in this article the aggregate demand-aggregate supply model (briefly AD-AS model) was applied to explain price level and output through the relationship of aggregate demand and aggregate supply on example of the USA economy. Based on the theory of John Maynard Keynes it was shown that the model AD-AS is adequate for US economy. At the same time there is room to improve this model or even establish new ones based on the results of this study in order to predict future levels ofprice and output.
Аннотация: в данной статье модель агрегированного спроса - предложения (сокращенно AD-AS модель) была использована, чтобы объяснить значения уровней цены и выпуска через отношения совокупного спроса и совокупного предложения на примере экономики США. Основываясь на теории Джона Мейнарда Кейнса было показано, что модель адекватна для экономики США. В тоже время, основываясь на результатах данного исследования, существует возможность модификации классической модели для лучшего прогнозирования динамики уровня цен и выпуска.
Keywords: AD-AS model, Keynesian theory, Macroeconometrics, USA Economy.
Ключевые слова: AD-AS модель, теория Кейнса, макроэконометрика, экономика США.
The AD-AS or aggregate demand-aggregate supply model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply. It is based on the theory of John Maynard Keynes presented in his work “The General Theory of Employment, Interest, and Money”. It is one of the primary simplified representations in the modern field of macroeconomics, and is used by a broad array of economists, from libertarian, Monetarist supporters of laissez-faire, such as Milton Friedman to Post-Keynesian supporters of economic interventionism, such as Joan Robinson. The AD/AS model is used to illustrate the Keynesian model of the business cycle [1].
The AD-AS framework divides the economy into two parts - the ‘demand side’ and the ‘supply side’ - and examines their interaction using accounting identities, equilibrium conditions and behavioral and institutional equations. The ‘demand side’ typically examines factors relating to the demand for goods and the demand and supply of assets. The ‘supply side’ typically examines factors relating to output and pricing decisions of producers, and factor markets. The framework ensures that neither demand nor supply side factors are overlooked in the analysis and that macroeconomic outcomes depend on the interaction between the different markets. The particular partitioning into ‘aggregate demand’ and ‘aggregate supply’ along with the choice of terminology may provide the pedagogic advantage of making macroeconomic analysis possible in terms of the same tools as the simplest microeconomic model of the market. But this advantage comes at a high price.
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AS =Y +aP ;
<AD =7 -T +1 +G +NX ■
AS = AD
Movements of the two curves can be used to predict the effects that various exogenous events will have on two variables: real GDP and the price level. Furthermore, the model can be incorporated as a component in any of a variety of dynamic models (models of how variables like the price level and others evolve over time). Simultaneous causality bias in the OLS regression of Personal Income on price arises because price and income are determined by the interaction of aggregate demand and aggregate supply: where Y is Personal Income, P is the price level (hereby, price index), T is an exogenous component of real taxes levied, I is Gross Private Domestic Investment, G is real government spending, NX is exports less imports for the period t [2].
Most macroeconomists believe that, in the absence of shocks, the economy would reach equilibrium after perhaps 5 years. Thus the economy is in equilibrium in the “long run” (after 5 years). Given that shocks are always hitting, the economy is not likely to be in long run equilibrium at any point in time. Yet the force of attraction of equilibrium keeps the economy hovering around the equilibrium [3].
The focus of many macroeconomic studies is the requirement to undertake an analysis of the effects of a change in one macroeconomic variable on another one. In developing this analysis, the AD-AS approach can draw on insights from the Post Keynesian, neo-Marxian and structuralist traditions, as well as from the burgeoning literature on behavioral economics. Several turn-of-the-century assessments of the state of macroeconomics regard the discipline as healthy. There may have been fierce debates and controversies, but these debates mainly served to highlight deficiencies of existing models and to stimulate the creation of new improved hybrid models.
The history of macroeconomics, according to Blanchard (2000, p. 1375) is “one of a surprisingly steady accumulation of knowledge”, and “progress in macroeconomics may well be the success story of twentieth century economics”. Woodford’s (1999) assessment gives slightly more weight to the disagreements and revolutions in the second half of the twentieth century. But Woodford also sees convergence, and he concludes that “modern macroeconomic models are intertemporal general equilibrium models derived from the same foundations of optimizing behavior on the part of households and firms as are employed in other branches of economics” (p. 31).
The author supports these assessments. In his view, a large part of what has happened in macroeconomics since the late 1960s has been a wasteful detour. A generation of macroeconomists has grown up learning tools that may be sophisticated, but the usefulness of these tools is questionable. Moreover, a great deal of damage may be, and has been, done when the tools are applied to real-world situations. In this paper the author argues that the Keynesian model of AD-AS is not applicable to the real economy, as it must be adjusted to a certain economy’s conditions. The author has modified the old AD-AS model for the US economy to provide further accurate forecast of economic indicators.
In order to conduct the analysis of the Keynesian model of AD-AS the author used the real statistical data reported by the U.S. Department of Commerce, U.S. Bureau of economic analysis, for the reporting period December 2015 (http://www.bea.gov).
This paper seeks to explain AD and AG with 2SLS method, but with comparison of the influences of one variable on both equations, to contest their credibility through the thorough testing of data, and to forecast the trends.
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The specified model of AD and AS is described as follows: AS t = A) + + Pi Pt+ et
ADt = a0 + aiYt - a2Tt + a3It + a4Gt + a5 NXt + N
E (et) = 0, E (ut) = 0
a(et) = const, a(ut) = const
The most often used way to identify a structural equation is to use prior information provided by economic theory to exclude certain variables from an equation that appear in a model. This is called obtaining identification through exclusion restrictions. To exclude a variable from a structural equation, the value of its coefficient is to be restricted to zero. This type of zero fixed value restriction is called an exclusion restriction because it has the effect of omitting a variable from the equation to obtain identification.
Since the values for Pj and p2 are determined, it is possible to construct an estimated Aggregate Supply model for Keynesian AD-AS model for the US economy, which will depend on Price level, (Pt):
'as
t
<
= -5.94+ 0.2 P +s
(0.2) (0.02)
t
(0.06)
R2 = 0.96; F = 182.87; Fcrit = 5.32
As far as the conditions were set, the model is valid.
Aggregate Demand model for Keynesian AD-AS model for the US economy, which will depend on Tax, (Tt), Gross Private Domestic Investment, (It), Government Spending, (Gt), and Net Exports (NXt):
AD, =14.24- 0.95 Ys -224T + 2.22 7 + 2.42 G, + 8.69 NX, +0.02
(4.04) (0.41) (0.44) (0.25) (0.51) (2.32)
R2 =1.00;F = 544.90; = 626
This study explored the problem of using the old Keynesian macroeconomic model with respect to the US economy. The tools applied in this study include many commonly used econometric tests and the estimation by means of the Two-Stage Least Square method.
The Keynesian macroeconomic model is not always applicable in the real economy that is why for the further study the author used the modified (new) model. After all the analysis conducted there has been obtained an AD-AS model for the US economy:
' AS, =- 5.94+ 0.2 P +et
(1.57) (0.02)
{ADt
14.24-0.95Y -2.24T + 2.221 + 2.42G. + 8.69NX, +vt
(4,04) (0,41) (0,44) (0,25) (0,51) (2,82)
l ADt = ASt
During the study it has been concluded that Personal Income is not significant for estimating aggregate supply, and the price multiplier is very negligible, thus, any change in the price will not have a great influence on the level of aggregate supply.
In the process of test-statistics in both datasets, it has been concluded that the regressions fit their lines well. It was proved that the coefficients of determination were not obtained randomly, and the estimated coefficients are very close to the actual values. In both equations there is statistical evidence that the error terms are positively autocorrelated. Also it is obvious that the observation lies between the confidence intervals, so our model is adequate.
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There is room to improve these existing models or even establish new ones based on the
results of this study. As with many models, a definitive answer will never be found as to
what exactly and how it describes aggregate supply and aggregate demand.
References
1. John Maynard Keynes. The General Theory of Employment, Interest and Money / Palgrave Macmillan. 1936
2. Blanchard O. What Do We Know about Macroeconomics that Fisher and Wicksell Did Not? // Quarterly Journal of Economics. 2000.
3. DanielMcFadden. Simultaneous Equations / Economics 240B. 1999.
4. Dutt A. K. Aggregate Demand and Aggregate Supply: A History / History of Political Economy. 2002.
5. Hicks J. The Crisis in Keynesian Economics // Oxford: Blackwell. 1974.
6. Tregub I. V. Keynesiannism and modern economy // http://www.freit.org/WorkingPapers / Papers / Development / FREIT984.pdf № 984 29.11.2015
7. Трегуб И.В. Математические модели динамики экономических систем / монография. М.: 2009. 120 c.
8. Трегуб И.В. Прогнозирование экономических показателей на рынке дополнительных услуг сотовой связи / Монография. Москва, 2009. 195 с.
Current trends of increasing investment attractiveness of the region Bisultanova A. (Russian Federation)
Актуальные направления повышения инвестиционной привлекательности региона Бисултанова А. А. (Российская Федерация)
Бисултанова Аза Айндиевна /Bisultanova Aza - кандидат экономических наук, доцент, кафедра банковского дела, факультет экономики и финансов,
Федеральное государственное бюджетное образовательное учреждение Высшего образования Чеченский государственный университет, г. Грозный
Аннотация: в статье автором проведен анализ некоторых показателей,
характеризующих инвестиционную активность на территории Чеченской Республики. Проведен сравнительный анализ объема инвестиций в основной капитал по субъектам Северо-Кавказского федерального округа в динамике лет. В конце исследования автором также обрисованы основные направления повышения инвестиционной привлекательности республики.
Abstract: in this article the author analyzes some indicators characterizing investment activity on the territory of the Chechen Republic. A comparative analysis of the volume of investment in fixed assets by the subjects of the North Caucasus Federal District in the years dynamics. At the end of the study the author also outlines the main directions of improving the investment attractiveness of the country.
Ключевые слова: инвестиционная привлекательность, инвестиции в основной капитал, инвестиционный климат.
Keywords: investment attractiveness, investment in fixed assets, the investment climate.
Основными факторами, способными увеличить приток инвестиций и обеспечить выполнение приоритетных задач государственной политики в области, являются эффективное управление инвестиционными процессами и формирование
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