On aggregation and its implications for aggregate behaviour (original) (raw)
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Micro Meets Macro Via Aggregation
SSRN Electronic Journal, 2009
This paper studies the fundamentals of the aggregation problem. The concept is most central in understanding the relations between micro and macroeconomics. Though aggregation is mentioned often it is not studied explicitly in this generality-only some special cases are governed so far. The study shows how the macro relations arise from the micro relations via aggregation. In addition, we try to give areader an idea of under what kind of conditions the representative agent approximation is appropriate.
Price indexes for elementary aggregates: The sampling approach
2002
At the lowest level of aggregation of a CPI or PPI quantity information is usually unavailable and nothing but matched samples of prices are used for the index computation. Familiar indexes used at this level of aggregation are those of Dutot, Carli, and Jevons. An important, yet often overlooked characteristic of these and similar indexes is that they are sample statistics, whose properties can be studied from the sampling point of view. This paper provides a systematic study of this topic and concludes with a number of recommendations for statistical practice.
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Aggregation and the Long Run Behaviour of Economic Time Series
1993
The aggregation problem is a well—known difficulty in macroeconometric modelling. It is frequently assumed in these models that the behaviour of • economic agents is uniform. Thus the behaviour of a single agent characterizes the aggregate behaviour of the agents (representative agent). However, there may always be some "outliers", some uncharacteristically behaving agents. Such outliers may well determine the time dynamics of the aggregate time series. The paper presents different Monte Carlo experiments to demonstrate this feature. This phenomenon may have an utmost significance in models assuming the cointegration of the variables. Aggregation and the Long Run Behaviour of Economic Time Series
On the microfoundations of aggregate demand and aggregate supply
2000
Economies with nominal rigidities are usually modeled in an Aggregate Demand/Aggregate Supply framework. Early papers in the 'New Keynesian Economics' literature typically assumed aggregate demand followed the quantity theory of money, but provided much more detailed formulations of aggregate supply. More recent papers have tried to give more detailed microfoundations for aggregate demand. However, since consumers and firms are linked both through the goods market and the labor market, in general the form of aggregate demand is unlikely to be independent of the specification of production technology and wage-and price-setting behavior which underlie aggregate supply, and aggregate supply may also not be independent of the preferences and constraints which underlie aggregate demand. This paper establishes necessary and sufficient conditions for a broad class of models under which aggregate demand may be derived separately from aggregate supply. The conditions are that both the marginal rate of substitution of consumption across periods and the marginal rate of substitution between consumption and real balances must be independent of hours worked. These conditions are restrictive; they are violated by two common money demand models, the Baumol-Tobin model and the shopping time model. JEL Classification Numbers: E12, E30
Preface to The Theory of Monetary Aggregation
Contributions to Economic Analysis, 2000
W. T. Foster wrote the following lines as a start to his preface of Irving Fisher's classic study, The Making of Index Numbers: "To determine the pressure of steam, we do not take a popular vote; we consult a gauge. Concerning a patient's temperature, we do not ask for opinions: we read a thermometer. In economics, however, as in education, though the need for measurement is as great as in physics or in medicine, we have been guided in the past largely by opinions. In the future, we must substitute measurement. Toward this end, we must agree upon instruments of measurement. That is the subject of this book." The above lines are also an appropriate introduction to the present book, edited by William Barnett and Apostolos Serletis. The present book is a collection of papers by Barnett and his co-authors (E.