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

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

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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Paper provided by Victoria 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. 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.
  2. Parsell, Bruce F & Powell, Alan A & Wilcoxen, Peter J, 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(197), pages 97-114, June.
  3. Adams, Philip D, 1991. "An Extended Linear Expenditure System with Assets," The Economic Record, The Economic Society of Australia, vol. 0(0), pages 109-17, Supplemen.
  4. Murphy, C W, 1988. "An Overview of the Murphy Model," Australian Economic Papers, Wiley Blackwell, vol. 27(0), pages 175-99, Supplemen.
  5. Andrew B. Abel & Olivier J. Blanchard, 1982. "An Intertemporal Model of Saving and Investment," NBER Working Papers 0885, National Bureau of Economic Research, Inc.
  6. 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.
  7. Feltenstein, Andrew, 1983. "A computational general equilibrium approach to the shadow pricing of trade restrictions and the adjustment of the exchange rate, with an application to Argentina," Journal of Policy Modeling, Elsevier, vol. 5(3), pages 333-361, November.
  8. Dale W. Jorgenson & Peter J. Wilcoxen, 1990. "Environmental Regulation and U.S. Economic Growth," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 314-340, Summer.
  9. Dinenis, Elias & Holly, Sean & Levine, Paul & Smith, Peter, 1989. "The London Business School econometric model : Some recent developments," Economic Modelling, Elsevier, vol. 6(3), pages 243-351, July.
  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 & Lawrence H. Summers, 1987. "Tax Policy, Asset Prices, and Growth: A General Equilibrium Analysis," NBER Working Papers 2128, National Bureau of Economic Research, Inc.
  12. Sen, Partha & Turnovsky, Stephen J, 1989. "Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 811-31, November.
  13. Partha Sen & Stephen J. Turnovsky, 1988. "Deterioration of the Terms of Trade and Capital Accumulation: A Reexamination of the Laursen-Metzler Effect," NBER Working Papers 2616, National Bureau of Economic Research, Inc.
  14. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
  15. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "A General Equilibrium Model for Tax Policy Evaluation," NBER Books, National Bureau of Economic Research, Inc, number ball85-1, June.
  16. Galeotti, Marzio, 1988. "Tobin's Marginal 'q' and Tests of the Firm's Dynamic Equilibrium," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(4), pages 267-77, October-D.
  17. 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.
  18. Victor Ginsburgh & Jean Waelbroeck, 1981. "Activity analysis and general equilibrium modelling," ULB Institutional Repository 2013/1649, ULB -- Universite Libre de Bruxelles.
  19. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  20. Mckibbin, W.J. & Siegloff, E.S., 1991. "The Australian Economy from the Global Perspective," Papers 86, Brookings Institution - Working Papers.
  21. 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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