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Delivers an insightful analysis of dynamic modelling in econometrics by bridging the structural with the time series approaches, and by focusing on representation theorems of integrated processes. This book provides an analytic setting to guide formulation and solution in closed form of vector autoregressive (VAR) models with unit roots

Abstract.  This paper studies how donations respond to unexpected permanent changes in income and tax rates in a recursive dynamic model. The dynamic approach yields several interesting insights. If marginal tax rates are progressive, a permanent jump in a household's income increases its consumption and donations in the short run, but has no effect in the long run. The permanent income elasticity of current donations is likely to exceed one. If the marginal tax rate is flat, the jump in income raises consumption and donations in both the short and the long run. A permanent marginal tax rate cut raises consumption and donations in the long run if marginal tax rates are progressive, while it reduces donations in the short run if it has little direct impact on tax payments. If the marginal tax rate is flat, a tax cut has a positive effect on consumption in both the short and the long run, but has an ambiguous effect on donations.

AbstractThe basis of systems modeling has been the Newtonian paradigm that states that the behavior of a system can be understood and anticipated by identifying its components and the causal links between them. This assumption leads to a set of deterministic differential or difference equations that governs the behavior of the system. However, such description is achieved by classifying elements into categories and supposing that only the most probable events in fact occur. But real systems evolve, that is, they add and subtract mechanisms, components, and interactions over time; the deterministic model does not reflect this. Clearly, evolution must therefore result from what has been removed in the reduction process. If we are to understand evolving systems better, to anticipate structural changes, and to explore the real impacts of decisions, we must study the effects on system dynamics of nonaverage behavior. We can then gain new insights into the nature of evolutionary processes and build better models that include the adaptive responses from within the system.