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"Natural Concepts in Macroeconomics,"
pdf file (117KB).
Ragnar Frisch proposed in 1936 a procedure for estimating
natural variable values by modifying what are now called
structural macroeconometric models. This paper shows that
Frisch's procedure can be used to illuminate natural concepts using
today's models. The procedure also forces one to be precise
regarding the assumptions used in moving from a short-run model to
a medium-run or long-run model.
After receiving some excellent comments from some referees, I have
decided not to try to get this paper published. The MC model is
close to the "Barred One" model in its properties, and it is less
ad hoc in that it is fully estimated. There is no ad hoc phasing in
for the MC model that is needed for Barred One. Also, the optimal
control methodology that is discussed in Section 5 probably
dominates any attempt to estimate natural values. With optimal
control methods there is no need for the concept of natural values.