The MESANGE model: re-estimation on National Accounts base 2000 - Part 1 Version with fixed-base volumes

Mesange is a quarterly macro-econometric model of the French economy. This model has been developed and is used jointly by INSEE and the French Treasury. This working paper presents the new version of the model. The data used in the re-estimation process are those of the National Accounts base 2000 with fixed-base volumes. The paper contains a set of standard simulations giving some examples of the results used in the evaluation of economic policy measures and in the study of standard macroeconomic shocks. A second version of the model, re-estimated on National-Account data with chained volumes to better suit forecasting and short-term analysis, will be presented in a forthcoming INSEE working paper. The structure of the model is not very different from the initial version (Allard-Prigent et al., 2002). The French economy is represented as a small-open economy where the rest of the world is treated as exogenous. The economy is divided into three sectors: the manufacturing, non-manufacturing and non-market sectors. The model describes short-term Keynesian dynamics and its long-term equilibrium is driven by supply-side determinants. The re-estimation of the model has enabled us to take into account the structural evolutions of the French economy that have occurred since the last estimation (notably in terms of changes in labour productivity growth, the long-term elasticity of unemployment rate to real wage and the elasticity of substitution between labour and capital). Some extensions have been achieved, such as the creation of an energy block and the improvement of the fiscal block.