A Comparison of National and International Aggregate Supply and Demand VAR Models: The United States, Japan and the European Economic Community By Ehsan Ahmed, J. Barkley Rosser, Jr., and Richard G. Sheehan C o n t e n t s : I. Introduction. - II. Theory. - II I. Data and Methodology. - IV. Con- clusions. I. Introduction I n this paper we examine the behavior of an aggregate supply and demand model using a vector autoregressive (VAR) reduced form system of equa- tions. In particular, we consider five-variable VAR models for the United States, Japan, and the European Economic Community (EEC). We also examine the interactions between these three economies. Besides providing evidence on the empirical relationships between macro variables, this paper also considers the usefulness of supranational models based on aggregate supply and demand versus LINK-type models. A decade-long discussion has focused on modeling entities such as the OECD or the world economy directly using aggregate economic variables. Weintraub [1958] and Davidson and Smolensky [1964] first used explicit aggregate supply and demand analysis at the national level. Duck et al. [1976], Gray et al. [1976], and Genberg and Swoboda [1977] estimated global aggre- gate demand models with a monetary flavor covering the Bretton Woods period. Beenstock and Dicks [1983] and Ahmed et al. [1988] more recently examined aggregate supply and demand models of the OECD. Klein [1978] and Hickman and Schleicher [1978] were the first to attempt to model at the global level based on inter-related national models using.the LINK model. Hickman [ 1983] reviewed various world models including com- patible general equilibrium approaches, with a focus on responses to oil price shocks. Steigum and Neary [ 1987] recently created a five-region non-market- clearing model in a LINK-type context. LINK-type models relate national macroeconometric models through a trade matrix and a set of foreign exchange rate relations. Asymmetries in the exchange-rate-related foreign trade multipliers of the respective national econ-