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Most Downloaded Articles
- Comparing Wealth Effects: The Stock Market versus the Housing Market by Case, Karl E./ Quigley, John M. and Shiller, Robert J.
- Employment by age, education, and economic growth: effects of fiscal policy composition in general equilibrium by Heylen, Freddy and Van de Kerckhove, Renaat
- The Effects of the Great Recession on Central Bank Doctrine and Practice by Bernanke, Ben S.
- Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States by Zhou, Xia and Carroll, Christopher D.
To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
Citation Information: The B.E. Journal of Macroeconomics. Volume 7, Issue 1, ISSN (Online) 1935-1690, DOI: 10.2202/1935-1690.1365, January 2007
- Published Online:
We construct a dynamic error correction model of the Australian labor market using a macroeconomic panel across seven states from 1972:3 to 1999:1. Medium-run equilibrium estimates support a real wage-productivity gap and an unemployment gap. The dynamic short-run estimates support expectations-augmented Phillips curves for wages and prices, and demand-led employment growth. We compare three procedures pooled, aggregate and mean group estimates. Considerable heterogeneity existed across states in the pooled procedure, and state-level variables had a significant impact in the aggregate procedure. Out-of-sample aggregate forecasting for the pooled, aggregate and mean group procedures suggests that the pooled one performs best.