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Interrelation, Structural Changes and Cointegration in a Model for Manufacturing Demand in the Nederlands

Published online by Cambridge University Press:  17 August 2016

Franz C. Palm  and
Gerard A. Pfann
Franz C. Palm
Affiliation:
University of Limburg
Gerard A. Pfann
Affiliation:
University of Limburg
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Summary

This paper is concerned with dynamic factor demand systems. First, for the intertemporal expected profit maximization problem given quadratic adjustment costs, it is shown that interrelations between factor inputs result from specific characteristics of the innovations in the technology – not from substitution or adjustment costs trade-off possibilities. Second, in line with the Lucas critique, the impact of a structural change in the process of the explanatory variables on the factor demand decision rules is analyzed. Third, the non-stationarity of the factor demand series can be accounted for by that of relative factor prices when demand and price series are cointegrated.

The model which allows for structural changes in the processes of the explanatory variables and for cointegration is applied to quarterly data for manufacturing in the Netherlands for the period 1971.1 – 1984. IV.

Résumé

Résumé

Cet article traite de systèmes dynamiques de demande de facteurs. On montre tout d'abord que, dans un contexte de maximisation intertemporelle du profit attendu avec des coûts d'ajustement quadratiques, les interrelations entre les facteurs résultent de caractéristiques spécifiques des innovations technologiques, plutôt que de possibilités d'arbitrages entre les coûts d'ajustement ou de substitution. Ensuite, dans la lignée de la critique de Lucas, on analyse l'impact d'un changement structurel dans la formation des variables explicatives sur les règles décisionnelles de demande de facteurs. Enfin, on montre que la non-stationnarité des séries de demande de facteurs peut s'expliquer par la non-stationnarité des prix relatifs des facteurs, lorsque les séries de demande et de prix sont cointégrées. Le modèle qui incorpore cointégration et changements structurels dans la formation des variables explicatives est appliqué au secteur manufacturier des Pays-Bas pour la période 1971. I-1984. IV.

Keywords

825824825824
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 57 , Issue 3 , 1991 , pp. 221 - 243
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1991 

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Footnotes

*

The authors wish to thank an unknown referee for helpful comments. Permission by J. Wiley & Sons, Ltd. for reusing some results from Kodde et al. (1990) is gratefully acknowledged. Gerard Pfann thanks the Royal Netherlands Academy of Arts and Science (K.N.A.W.) for financial support

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