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Policy Options to Reduce Unemployment: TRYM Simulations


  • Lei Lei Song

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • John Freebairn

    () (Department of Economics, The University of Melbourne)

  • Don Harding

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)


This paper evaluates different policy options to reduce unemployment by using a version of the TRYM model. For the purpose of this paper, the TRYM model has been modified in several respects, particularly by combining the private business and government trading enterprise sectors. For the long run, the neoclassical model closure means that the unemployment rate converges to an exogenously set NAIRU rate. For the short and medium run, periods well in excess of ten years, policy simulations show that macroeconomic policy changes, wage changes, labour productivity changes, and NAIRU changes affect employment and unemployment. Further, these policy effects are produced whether the model begins in a disequilibrium situation of unemployment above the NAIRU or at the long run equilibrium growth path with unemployment equal to the NAIRU.

Suggested Citation

  • Lei Lei Song & John Freebairn & Don Harding, 2001. "Policy Options to Reduce Unemployment: TRYM Simulations," Melbourne Institute Working Paper Series wp2001n19, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2001n19

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    References listed on IDEAS

    1. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-1185, July.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Lei Lei Song & Elizabeth Webster, 2003. "How Segmented are Skilled and Unskilled Labour Markets: the Case of Beveridge Curves," Australian Economic Papers, Wiley Blackwell, vol. 42(3), pages 332-345, September.
    4. Summers, Peter M., 2001. "Forecasting Australia's economic performance during the Asian crisis," International Journal of Forecasting, Elsevier, vol. 17(3), pages 499-515.
    5. Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 321-342, December.
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    Cited by:

    1. Ric D. Herbert & Gareth D. Leeves, 2003. "Labour Market Policies and Long-term Unemployment in a Flow Model of the Australian Labour Market," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 197-213, June.
    2. John Freebairn & Peter Dawkins, 2003. "Unemployment Policy: Lessons from Economic Analysis," Melbourne Institute Working Paper Series wp2003n22, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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