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Using the Murphy Model to Provide Short-Run Macroeconomic Closure for Orani

Author

Listed:
  • Breece, James H.
  • McLaren, Keith R.
  • Murphy, Chris
  • Powell, Alan A.

Abstract

A macro model incorporating rational expectations in financial markets (the Murphy Model - MM) is used to endogenize the macroeconomic environment for a comprehensive general equilibrium model (ORANI). The interface exploits the existence of variables which are endogenous to both models, calibrating on a shock to government spending, which is the principal common exogeneity. The responses of the half-dozen doubly endogenous variables feature prominently in the calibration procedure, which minimizes any conflict between the stories told about these variables by the two models. Prospective benefits include: (1) to the numerous policy-oriented users of ORANI, a facility allowing the macroeconomic environment to be determined by a macrodynamic model such as MM; (2) to these users, reassurance that ORANI's short-run translates in calendar time to about two years; (3) to the clientele of a macro model, the possibility of much more detailed projections..
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Suggested Citation

  • Breece, James H. & McLaren, Keith R. & Murphy, Chris & Powell, Alan A., 1991. "Using the Murphy Model to Provide Short-Run Macroeconomic Closure for Orani," Impact Project Archive 316149, Impact Research Centre, University of Melbourne.
    • Handle: RePEc:ags:ircipa:316149
    DOI: 10.22004/ag.econ.316149
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    References listed on IDEAS

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    1. P.D. Jonson & W.J. McKibbin & R.G. Trevor, 1980. "Models and Multipliers," RBA Research Discussion Papers rdp8006, Reserve Bank of Australia.
    2. repec:bla:ecorec:v:59:y:1983:i:165:p:166-79 is not listed on IDEAS
    3. Bruce F. Parsell & Alan A. Powell & Peter J. Wilcoxen, 1991. "The Effects of Fiscal Restraint on the Australian Economy as Projected by the Murphy and MSG2 Models: A Comparison," The Economic Record, The Economic Society of Australia, vol. 67(2), pages 97-114, June.
    4. 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.
    5. Parsell, Bruce & Powell, Alan & Wilcoxen, Peter, 1989. "The Reconciliation of Computable General Equilibrium and Macroeconomic Modelling: Grounds for Hope?," Impact Project Archive 295060, Impact Research Centre, University of Melbourne.
    6. Dixon, Peter B. & Parmenter, B. R. & Powell, Alan A., 1984. "The role of miniatures in computable general equilibrium modelling : Experience from ORANI," Economic Modelling, Elsevier, vol. 1(4), pages 421-428, October.
    7. Murphy, C W, 1988. "An Overview of the Murphy Model," Australian Economic Papers, Wiley Blackwell, vol. 27(0), pages 175-199, Supplemen.
    8. RUSSEL J. COOPER & KEITH R. McLAREN, 1983. "The Orani‐Macro Interface: An Illustrative Exposition," The Economic Record, The Economic Society of Australia, vol. 59(2), pages 166-179, June.
    9. Cooper, Russel, 1983. "A Tariff Experiment on the Interfaced ORANI-Macro System," Impact Project Archive 295051, Impact Research Centre, University of Melbourne.
    10. Pearson, K. R., 1988. "Automating the computation of solutions of large economic models," Economic Modelling, Elsevier, vol. 5(4), pages 385-395, October.
    11. repec:bla:ecorec:v:67:y:1991:i:197:p:97-114 is not listed on IDEAS
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    2. James B Davies, 2009. "Combining microsimulation with CGE and macro modelling for distributional analysis in developing and transition countries," International Journal of Microsimulation, International Microsimulation Association, vol. 2(1), pages 49-56.
    3. Dixon, Peter B. & Koopman, Robert B. & Rimmer, Maureen T., 2013. "The MONASH Style of Computable General Equilibrium Modeling: A Framework for Practical Policy Analysis," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 23-103, Elsevier.
    4. James B. Davies, 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," WIDER Working Paper Series DP2004-08, World Institute for Development Economic Research (UNU-WIDER).

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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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