Goyal, Ashima and Pujari, Ayan Kumar (2005): Identifying long run supply curve of India. Published in: Journal of Quantitative Economics , Vol. Volume, No. New Series , No. 2 (July 2005): pp. 1-15.
Download (249Kb) | Preview
Identifications of a vertical then a horizontal supply curve are successively imposed on Indian time series inflation and industrial output growth data in a two-equation Structural Vector Autoregression (SVAR) model. The results provide an indirect test of the identifications. A high elasticity of long run supply cannot be ruled out, because supply shocks have a large impact on inflation and demand has a large and persistent effect on output levels. But supply is subject to frequent shocks. Estimated structural shocks capture historical recessions and turning points well. Pro-cyclical policy induced demand shocks aggravated negative supply shocks or failed to take full advantage of positive supply side developments.
|Item Type:||MPRA Paper|
|Original Title:||Identifying long run supply curve of India|
|Keywords:||Horizontal and vertical supply curves, demand and supply shocks, Structural VAR, identification, historical decomposition.|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
|Depositing User:||ashima goyal|
|Date Deposited:||21. Jul 2010 10:16|
|Last Modified:||14. Feb 2013 17:54|
Bjornland H. C. (2001), ‘Identifying Domestic and Imported Core Inflation', Applied Economics, Vol. 33, pp. 1819-1831.
Blanchard O. J. and D. Quah (1989), ‘Dynamic Effects of Aggregate Demand and Supply Disturbances’, American Economic Review, Vol. 79 (4), pp. 655-671.
Blanchard O. J. and L.H. Summers (1987), ‘Hysterisis in Unemployment’, European Economic Review, Vol. 31, pp. 288-295.
Enders, Walter (2004), ‘Applied Econometric Time Series’, John Wiley and Sons, Second Edition.
Farmer, R. (1999), The Macroeconomics of Self-Fulfilling Prophecies, Cambridge, MA: MIT Press, Second Edition.
Giannini C. (1992), ‘Topics in Structural VAR Econometrics', Lecture Notes in Economics and Mathematical Systems, Springer Verlag.
Lack, C. and C., Lenz (1999), A Program for the Identification of Structural VAR Models, http://www.unibas.characteristic/wwz/makro/svar
Mankiw, G. and D. Romer (eds.) (1991), New Keynesian Economics: Coordination Failures and Real Rigidities, Cambridge, MA: NBER/MIT Press.
Quah D. (1995) ‘Misinterpreting Dynamic Effects of Aggregate Demand and Supply Disturbances’, Economic Letters, Vol. 49, pp. 247-250.
Quah, D. and S. P. Vahey (1995), ‘Measuring Core Inflation’, Economic Journal Vol. 105 (432), PP. 1031-1044.