DP164 An Aggregate Model of Output, Inflation and Interest Rates for Industrialised Countries

Author(s): Michael Beenstock
Publication Date: March 1987
Keyword(s): Commodity Prices, GDP, Loanable Funds, Oil Prices, Portfolio Balance Effect, World Capital Market
JEL(s): 122, 131, 132, 134, 212, 431, 441
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=164

We estimate an aggregate econometric model of the industrial economies using annual data drawn from the postwar period. The model includes equations for GDP, inflation, interest rates and non-oil commodity prices. GDP and inflation reflect the evolution of aggregate supply and demand while commodity prices vary directly with economic activity and real oil prices and inversely with real interest rates. The latter depend upon the supply and demand for loanable funds in the world capital market as well as portfolio balance effects and economic activity.