An Assessment of Dynamic Behavior in the U.S. Catfish Market: An Application of the Generalized Dynamic Rotterdam Model

The generalized dynamic Rotterdam model was used in estimating U.S. demand for disaggregated catfish. The overall goal was to examine habit persistence in consumption and to determine the adjustment process in demand. Results indicated that it took up to 1 month for catfish-product demand to fully adjust to changes in expenditures and prices. Additionally, habit persistence played a role in demand where present consumption of a given product was positively affected by past consumption of that product. Consequently, U.S. catfish demand was significantly more elastic in the long-run.catfish, demand, dynamics, partial adjustment, Rotterdam model, Agribusiness, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Institutional and Behavioral Economics, C51, Q11, Q13, Q17,

Adjustment Is Much Slower Than You Think

In most instances, the dynamic response of monetary and other policies to shocks is infrequent and lumpy. The same holds for the microeconomic response of some of the most important economic variables, such as investment, labor demand, and prices. We show that the standard practice of estimating the speed of adjustment of such variables with partial-adjustment ARMA procedures substantially overestimates this speed. For example, for the target federal funds rate, we find that the actual response to shocks is less than half as fast as the estimated response. For investment, labor demand and prices, the speed of adjustment inferred from aggregates of a small number of agents is likely to be close to instantaneous. While aggregating across microeconomic units reduces the bias (the limit of which is illustrated by Rotemberg's widely used linear aggregate characterization of Calvo's model of sticky prices), in some instances convergence is extremely slow. For example, even after aggregating investment across all establishments in U.S. manufacturing, the estimate of its speed of adjustment to shocks is biased upward by more than 80 percent. While the bias is not as extreme for labor demand and prices, it still remains significant at high levels of aggregation. Because the bias rises with disaggregation, findings of microeconomic adjustment that is substantially faster than aggregate adjustment are generally suspect.Speed of adjustment, discrete adjustment, lumpy adjustment, aggregation, Calvo model, ARMA process, partial adjustment, expected response time, monetary policy, investment, labor demand, sticky prices, idiosyncratic shocks, impulse response function, Wold representation, time-to-build

Lumpy Labor Adjustment as a Propagation Mechanism of Business Cycles

I explore the aggregate effects of micro lumpy labor adjustment in a prototypical RBC model, which embeds a stochastic labor duration mechanism in the spirit of Calvo(1983), and it extends this approach by introducing a Weibull-distributed labor adjustment process to capture the increasing hazard function corroborated by the micro data. My principal findings are: The aggregate labor demand equation derived from the baseline Calvostyle model corresponds to the same reduced form as the quadratic-adjustment-cost model and deep parameters have a one-to-one mapping. However, this result does not hold in general. When introducing the Weibull labor adjustment, the aggregate dynamics vary with the extent of increasing hazard function, e.g., the volatility of aggregate labor is increasing, but the persistence is decreasing in degree of the increasing hazard of the labor adjustment.business cycles; heterogeneous labor rigidity; increasing hazard function; Weibull distribution

Monetary policy effects in the short and long run under alternative wealth assumptions

In this paper an ad hoc deterministic macroeconomicmodel, assuming economic agents possess rational expectations, is developed. Emphasis is placed upon the long run nature of the adjustment process, through inclusion of capital stock accumulation and current account balance considerations, arising from an expansion in the monetary growth rate. The significance of wealth for the model\u27s steady s ta te and dynamic properties is emphasised, as well as upon the adjustment process itself. It is concluded that dynamic stability requires the inclusion of wealth in the output demand equation, and where this is the case a monetary growth expansion prod u ce s rea l e ffe c ts during the adjustment process as well as in the long run steady state. The additional inclusion of wealth in the money demand equation produces marginal differences in the a d ju s tm e n t of the macroeconomic variables emphasised, during both the adjustment process and in steady state

Nonstationary Time-Series Modeling versus Structural Equation Modeling: With an Application to Japanese Money Demand

The issues of identification, estimation, and statistical inferences of nonstationary time series and simultaneous equation models are reviewed. It is shown that prior information matters and the advantage of dichotomization of the traditional autoregressive distributed lag model into the long-run equilibrium relation and the short-run dynamic adjustment process as an empirical modeling device may be exaggerated. A Japanese money demand study is used to illustrate that a direct approach yields a more stable long-run and short-run relationship and has better predictive power than the approach of letting the data determine the long-run relationship and modeling the short-run dynamics as an adjustment of the deviation from its equilibrium position.