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The Reconciliation of Computable General Equilibrium and Macroeconomic Modelling: Grounds for Hope?

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  • Bruce F. Parsell
  • Alan A. Powell
  • Peter J. Wilcoxen

Abstract

In the aftermath of the rational expectations debate and the onslaught of the New Classical economics,some builders of macroeconometric models have begun to change some of their habits, arguably for the better. In particular,neoclassical discipline is increasingly respected in the formulation of the steady states or balanced growth solutions of the latest versions of several models (e.g., Australia's Murphy Model,and the McKibbin-Sachs Global Model). As well,the behaviour of certain variables (especially exchange rates and investment) increasingly tends to be linked to intertemporal optimization. In this paper we evaluate these innovations and illustrate the role of each,using recent simulations of the Murphy and McKibbin-Sachs models. We conclude that conditions have never been better for convergence in the two streams of economy-wide modelling.

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Bibliographic Info

Paper provided by Monash University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number ip-44.

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Date of creation: Dec 1989
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Handle: RePEc:cop:wpaper:ip-44

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  1. Parsell, B.F. & Powell, A.A. & Wilcoxen, P.J., 1990. "The Effects Of Fiscal Restraints On The Australian Economy As Projected By The Murphy And Msg2 Models: A Comparison," CEPR Discussion Papers 225, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  2. Murphy, C W, 1988. "Rational Expectations in Financial Markets and the Murphy Model," Australian Economic Papers, Wiley Blackwell, vol. 27(0), pages 61-88, Supplemen.
  3. Budd, Alan & Dicks, Geoffrey & Holly, Sean & Keating, Giles & Robinson, Bill, 1984. "The London Business School econometric model of the UK," Economic Modelling, Elsevier, vol. 1(4), pages 355-420, October.
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  5. Sen, Partha & Turnovsky, Stephen J., 1989. "Deterioration of the terms of trade and capital accumulation: A re-examination of the Laursen-Metzler effect," Journal of International Economics, Elsevier, vol. 26(3-4), pages 227-250, May.
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  7. Treadway, Arthur B, 1969. "On Rational Entrepreneurial Behaviour and the Demand for Investment," Review of Economic Studies, Wiley Blackwell, vol. 36(106), pages 227-39, April.
  8. Goulder, Lawrence H. & Summers, Lawrence H., 1989. "Tax policy, asset prices, and growth : A general equilibrium analysis," Journal of Public Economics, Elsevier, vol. 38(3), pages 265-296, April.
  9. Turnovsky, S. & Sen, P., 1988. "Deterioration Of The Term Of Trade And Capital Eccumulation A Reexamination Of The Laursen-Metzler Effect," Discussion Papers in Economics at the University of Washington 88-08, Department of Economics at the University of Washington.
  10. McKibbin, Warwick J & Siegloff, Eric S, 1988. "A Note on Aggregate Investment in Australia," The Economic Record, The Economic Society of Australia, vol. 64(186), pages 209-15, September.
  11. Lawrence H. Goulder & Barry Eichengreen, 1989. "Savings Promotion, Investment Promotion, and International Competitiveness," NBER Chapters, in: Trade Policies for International Competitiveness, pages 5-52 National Bureau of Economic Research, Inc.
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  16. Mckibbin, W.J. & Siegloff, E.S., 1991. "The Australian Economy from the Global Perspective," Papers 86, Brookings Institution - Working Papers.
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Cited by:
  1. Warwick. J. McKibbin, . "Quantifying APEC Trade Liberalization: A Dynamic Analysis," Discussion Papers 122, Brookings Institution International Economics.
  2. Breece, James H, et al, 1994. "Using the Murphy Model to Provide Short-run Macroeconomic Closure for ORANI," The Economic Record, The Economic Society of Australia, vol. 70(210), pages 292-314, September.
  3. Klepper, Gernot & Lorz, Jens Oliver & Stähler, Frank & Thiele, Rainer & Wiebelt, Manfred, 1993. "Empirische allgemeine Gleichgewichts-Modelle: Struktur und Anwendungsmöglichkeiten," Kiel Working Papers 595, Kiel Institute for the World Economy.

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