Werner Smolny | Akateeminen Kirjakauppa

A macroeconomic disequilibrium model is developed for the
Federal Republic of Germany. Starting with a microeconomic
model of firm's behaviour, the optimal dynamic adjustment of
employment and investment is derived. The model of the firm
is complemented by an explicite aggregation procedure which
allows to derive macroeconomic relations. The model is
estimated with macroeconomic data for the Federal Republic
of Germany.
An important feature is the consistent introduction of
dynamic adjustment into a model of the firm. A new method is
the particular approach of a delayed adjustment of
employment and investment.
The estimation results show significant underutilizations of
labour and capital and indicate the importance of supply
constraints for imports and exports. As the most prominent
result, they reveal the importance of the slow adjustment of
employment and investment for the macroeconomic situation in
Germany and especially for the persistence of high
unemployment in the eighties.