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Forecasting Versus Policy Analysis with the ORANI Model

Author

Listed:
  • Peter B. Dixon
  • B. R. Parmenter
  • Mark Horridge

Abstract

ORANI is a detailed general equilibrium model of the Australian economy. It has been applied many times by economists in universities, government departments and business in analyses of the effects on industries, occupational groups and regions of changes in policy variables (e.g., taxes and subsidies) and in other aspects of the economic environment (e.g., world commodity prices). These applications have been comparative static, i.e, they have been concerned with questions of how different the economy would be with and without the changes under investigation. They have not been concerned with forecasting the future state of the economy. More recently we have experimented with the model for forecasting. In a pilot exercise (Dixon, 1986), ORANI was used to forecast growth rates of industry outputs in Australia for the period 1985-1990. This revealed some problems inherent in the use of computable general equilibrium models for forecasting. In section 2, we describe the difference between comparative static analysis and forecasting, in general terms, and with specific reference to the ORANI model. We also discuss some computational difficulties which arise in applying ORANI to forecasting. in section 3 we present some numerical examples to supplement the theoretical material in section 2. Finally, section 4 contains some brief concluding comments on the strengths and limitations of ORANI as a forecasting device.

Suggested Citation

  • Peter B. Dixon & B. R. Parmenter & Mark Horridge, 1986. "Forecasting Versus Policy Analysis with the ORANI Model," Centre of Policy Studies/IMPACT Centre Working Papers op-56, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:op-56
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    Citations

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    Cited by:

    1. Peter B. Dixon, 1986. "Prospects for Australian Industries and Occupations, 1985 to 1990," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 19(1), pages 3-28.
    2. AydIn, Levent & Acar, Mustafa, 2011. "Economic impact of oil price shocks on the Turkish economy in the coming decades: A dynamic CGE analysis," Energy Policy, Elsevier, vol. 39(3), pages 1722-1731, March.

    More about this item

    Keywords

    CGE Forecasting;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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