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Smoothing The Aggregate Fix-Price Model And The Use Of Business Survey Data

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  • Kooiman, P.

Abstract

The aggregate two-market fix-price model involves discrete regime switches that are grossly unrealistic. In order to derive a smoothed version of the model I aggregate firms in disequilibrium, using the distribution of notional supplies and demands in the population of firms as a weight function. In the aggregate this yields a mix of regimes that varies continuously over the cycle. Each of the regimes is characterized by the operation of a particular constraint. This allows us to make use of business survey results reporting on the proportions of firms operating capacity constrained, demand constrained, labour constrained or unconstrained. The model is applied to the Dutch manufacturing sector.

Suggested Citation

  • Kooiman, P., 1983. "Smoothing The Aggregate Fix-Price Model And The Use Of Business Survey Data," Econometric Institute Archives 272282, Erasmus University Rotterdam.
    • Handle: RePEc:ags:eureia:272282
    DOI: 10.22004/ag.econ.272282
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    References listed on IDEAS

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