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"Natural Concepts in Macroeconomics," June 2005.

Paper: pdf file

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.