Aggregation in Macroeconomic Models: An Empirical Input-Output Approach
نویسنده
چکیده
The aggregation level of industries in the Danish macroeconomic model ADAM is examined using a new indicator of aggregation bias. The indicator is decomposed into contributions from the original industries, thereby clearly identifying the aggregation problems which caused the 6 industry groups of the older versions of ADAM to be disaggregated into the current 19 groups. An aggregation key minimizing the new bias indicator is found: From the microlevel of 64 industries, 18 "optimal" industry groups are formed through "clustering"; these groups are very similar to the current ADAM groups. Altogether, the conclusions based on the new indicator closely resemble those reached through years of practical experience. JEL classification: D57.
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