An Annual Macroeconomic Disequilibrium Growth Model of the German Economy, 1880–1979

Andrea Sommariva and Giuseppe Tullio

Chapter 5 in German Macroeconomic History, 1880–1979, 1987, pp 193-212 from Palgrave Macmillan

Abstract: Abstract In this chapter a disequilibrium macroeconomic model of the German economy is presented. The model is specified in continuous time and is estimated from 1880 to 1979 on annual data. It explains the trends and fluctuations in the rate of capital accumulation, output, employment, and the balance-of-payments. Its long-run properties are founded in neoclassical theory. The main aims of the model are first, to explain the interdependence between the main economic aggregates in Germany during the last one hundred years and to show that despite enormous structural changes in the economy and changes in territory, the behaviour of the German private sector from 1880 to 1979 was stable. The model presented here and the description of the main economic developments presented in Chapter 1 are therefore highly complementary. The second aim is to test within the structural model the validity of the quantity theory of money as an hypothesis about the determination of the price level, and of the Fisher equation as an hypothesis about the determination of nominal interest rate, following Lucas’ (1980) suggestion. The third aim is to test by simulating the model to what extent the remarkable rate of growth of German real net national product per capita from 1950 to the end of the 1960s war affected previous war destructions and losses of territory.

Keywords: Interest Rate; Monetary Policy; Fiscal Policy; Nominal Interest Rate; Exchange Rate Change (search for similar items in EconPapers)
Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-06591-2_6

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DOI: 10.1007/978-1-349-06591-2_6

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