Empirical determination of aggregate demand and supply curves: The example of the RWI Business Cycle Model

► We estimate the AD and AS curves of a macroeconometric model for Germany. ► We determine the influence of an endogenized government sector on AD/AS. ► On average model elasticities meet expectations from macroeconomic theory. ► The short-term AS curve is flat implying strong real effects from demand shocks. ► The income effect of a wage shock dominates model reactions in the first year.