Dynamic Factor Demand in a Rationing Context: Theory and Estimation of a Macroeconomic Disequilibrium Model for the Federal Republic of Germany

A macroeconomic disequilibrium model is developed for the

Federal Republic of Germany. Starting with a microeconomic

model of firm's behaviour, the optimal dynamic adjustment of

employment and investment is derived. The model of the firm

is complemented by an explicite aggregation procedure which

allows to derive macroeconomic relations. The model is

estimated with macroeconomic data for the Federal Republic

of Germany.

An important feature is the consistent introduction of

dynamic adjustment into a model of the firm. A new method is

the particular approach of a delayed adjustment of

employment and investment.

The estimation results show significant underutilizations of

labour and capital and indicate the importance of supply

constraints for imports and exports. As the most prominent

result, they reveal the importance of the slow adjustment of

employment and investment for the macroeconomic situation in

Germany and especially for the persistence of high

unemployment in the eighties.