A Semi-Classical Model of Price Level Adjustment

Bennett McCallum

No 4706, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the theoretical and empirical properties of a model of aggregate supply behavior that was introduced in the 1970s but has received inadequate attention. The model postulates that price changes occur so as to gradually eliminate discrepancies between actual and market-clearing values and to reflect expected changes in market-clearing values. Its implications are more 'classical' than most alternative formulations that reflect gradual price adjustment. Empirical results, which utilize a proxy for market-clearing output that is a function of fixed capital and the real price of oil, are moderately encouraging but not entirely supportive.

JEL-codes: E13 E32 (search for similar items in EconPapers)
Date: 1994-04
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Published as Carnegie-Rochester Conference Series on Public Policy, vol. 41, pp. 251-284 December 1994

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Journal Article: A semi-classical model of price-level adjustment (1994)
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