The gains and losses to predicting nominal income by disaggregating via the new classical aggregate supply and rational expectations hypotheses

In this paper we compaia the predictive power of two types of model of nominal income: one based on a simple single equation aggregate framework; the second disaggregated into price level and output components. The source of the decomposition of nominal income of the type of model that is considered here are the twin hypotheses of rational expectations and structural neutrality. The model chosen as being representative of this approach to macroeconomic model building and against which some single equation models are compared isBarro's 1978] model of the price level and output in the U.S.