An Application of Response Surface Methodology to a Macroeconomic Model.
AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OH SCHOOL OF ENGINEERING
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The purpose of this thesis is to apply response surface methodology to a macroeconometric model to facilitate better analysis with the model. First and second degree polynomial response surface equations express endogenous variables as functions of selected exogenous variables in the Klein-Goldberger econometric model. Second degree polynomial response functions are used to derive function multipliers. The function multipliers show that the impact of changes in exogenous variables on endogenous variables depends on the levels of one or more other exogenous variables. The function multipliers are used to conduct policy analysis and assess factor importance. As an extension, first degree polynomial response functions are used in an example problem to maximize gross national product subject to constraints on unemployment, inflation, and ranges of fiscal policy variables. The example problem demonstrates the flexibility and value of developing a response surface equation for complex macroeconometric models.
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