Chapter

The IS—LM Cores of Three Econometric Models

R. Jeffery Green, Bert G. Hickman, E. Philip Howrey, Saul H. Hymans and Michael R. Donihue

in Comparative Performance of U.S. Econometric Models

Published in print June 1991 | ISBN: 9780195057720
Published online October 2011 | e-ISBN: 9780199854967 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780195057720.003.0004
The IS—LM Cores of Three Econometric Models

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This chapter discusses the methodology of IS-LM and AD-AS system reduction and illustrates its application to three U.S. econometric models: the Hickman-Coen (HC) Annual Growth Model, the Indiana University Econometric Model (EMUS), and the University of Michigan's Quarterly Econometric Model (MQEM). Bert Hickman compares the estimation of the short-run IS, LM, and AS locuses by partial simulation techniques and full-model comparative-static experiments. In the next section, M.N. Green measures the short- and long-run elasticities of the IS, LM, AD, and AS locuses of the Indiana Model by partial simulation methods. In the third section, E. Philip Howrey, Saul Hymans, and Michael Donihue illustrate the use of IS-LM analysis to interpret macroeconometric model simulations in a detailed examination of the responses of the MQEM model to a fiscal shock over a ten-year horizon. The final section offers some concluding observations on the usefulness of the general approach.

Keywords: IS-LM; AD-AS; system reduction; econometric models; simulations; fiscal shock; elasticities

Chapter.  14070 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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