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Q. Explain the labor market in the cross model?
In cross model, both P and W are exogenous andconstant. Hence real wage is constant and it is not essentially equal to the equilibrium real wage. Model of the labor market in the cross model can be explained by the below figure:
Figure: The labor market in the cross model
Lag Length criteria VAR Lag Order Selection Criteria Endogenous variables: OIL EXCH R RPI LUNEMP GDP
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