Economic Modeling White Papers
A Two-Sector Approach to Modeling U.S. NIPA Data
Overview The one-sector Solow-Ramsey model is the most popular model of long-run economic growth. This paper argues that a two-sector approach, in which technological progress in the production of durable goods exceeds that in the rest of the economy, provides a far better picture of the long-run behavior of the U.S. economy. The paper shows how to use the two-sector approach to model the real chain-aggregated variables currently featured in the U.S. National Income and Product Accounts. It is shown that each of the major chain-aggregates - output, consumption, investment, and capital stock - will tend in the long-run to grow at steady, but different, rates. Implications for empirical analysis based on these data are explored.
| Publisher | Federal Reserve Board | File Format | PDF, requires Acrobat Rdr 5 |
|---|---|---|---|
| Date Published | April 2001 | Downloads | 3 |
| Format | White Papers | ||
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