Alternative bias approximations in first-order dynamic reduced form models

Article Abstract:

The small sample bias of the least squares estimator has been examined in a first-order dynamic reduced form model with normally-distributed white noise disturbances and an arbitrary number of exogenous regressors. Results indicate that the least squares bias can be significant in dynamic reduced form equations. There is a sharp increase in the bias when the standard deviation of the reduced form disturbance increases. The bias corrected estimator works only when disturbances are small.

Estimation theory, Regression analysis, Least squares

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Capacity utilization and market power

Article Abstract:

A study presents a macroeconomic model of determining factors affecting capacity underutilization in business cycles. The model presents in particular an economy consisting of a final and intermediate goods sectors faced with idiosyncratic demand uncertainty. The proportion of firms with idle capacities have a significant impact on the short-term response of the economy to exogenous stimuli. It also affects the relative significance of quantity and price adjustments.

Macroeconomics, Utility theory, Utility functions

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