Resilience in a behavioural/Keynesian regional model. (June 2021)

• Record Type: Journal Article
• Authors: Allan, Grant; Figus, Gioele; McGregor, Peter G.; Swales, J. Kim
• Is Part Of: Environment and planning. Volume 53:Number 4(2021)
• Page Start: 858
• Page End: 876
• Publication Date: 2021-06
• Subjects: Regional resilience -- computable general equilibrium modelling -- behavioural economics -- Keynesian economics; City planning -- Periodicals; Regional planning -- Periodicals; City planning; Regional planning; Periodicals; 333.7
• DOI: 10.1177/0308518X20941775
• Languages: English
• ISSNs: 0308-518X

Abstract

This paper constructs a regional dynamic macroeconomic model with an eclectic, broadly Keynesian and behavioural flavour. The model, which is parameterized on Scottish data, is used to identify the impact of expectations and business confidence on regional resilience. Simulations compare the evolution of the regional economy after a temporary negative export shock under a range of investment functions. The mainstream perfect foresight formulation generates a reduction in activity, which is small and is limited to the duration of the shock. The heuristic-based, imperfect-information investment models produce more negative, longer-lasting and unstable adjustment paths.