Spreadsheet I use for Effective Demand Calculations

Basic Effective Demand Limit, L = labor share index * 0.76

Effective demand on real GDP = rGDPeT/L (1 -(1 - 1/e)T/L)

Effective Demand Monetary rule with NGDP targeting = z(T² + L²) - (1 - z)(T + L) + (1+a)current core inflation + acore inflation average - 2acore inflation target

z = (2L + Natural real rate)/(2L² + 2L) ............................ T = capacity utilization*(1 - unemployment rate)
UT index = L - T ... (UT index goes to zero at limit of business cycle.)

New economic thinking... effective demand limit upon the utilization of labor and capital

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02/20/2015

Spreadsheet I use for Effective Demand Calculations

I just want to make public the spreadsheet that I use for calculating Effective Demand. I cleaned it up a bit.

You will be able to see the equations in the individual cells. The flow of how the information is processed may be hard to follow. You would have to "trace the precedents and dependents" of each cell to see how the information flows.

The second sheet is the one that I use for regressions. I have to copy over the ED-FF numbers from the "NGDP adj inflation target" sheet each time I do an iteration of a regression.

The third sheet was the preliminary calculations before I incorporated the equation for NGDP targeting. I include it just for the record.

Download Effective demand calculations

You can download the Excel file at this link.

Posted by Edward Lambert on 02/20/2015 in equation basics | Permalink

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Synopsis of Effective Demand

Data as of 3rdQ-2018
Effective Demand = $18.433 trillion
Real GDP = $18.671 trillion
Productive Capacity = $24.872 trillion
UT index is at effective demand limit = -0.92%
Effective demand limit = 74.1%
TFUR = 75.1%
ED Fed rate rule = 4.0%
Estimated Natural Real Interest rate = 2.3%
Short-term real interest rate = 2.8%

There is no recession for 3rdQ-2018. Chance of recession is growing as economy has now reached 2nd effective demand limit in this business cycle. I am forecasting that economic conditions will begin to contract in the second half of 2018.

Click on Graphs below to see updated data at FRED.

UT Index (measure of slack):