The MESANGE macroeconometric model: re-estimation and innovations

Mesange is a quarterly macroeconometric model of the French economy developed and used jointly by the National Institute of Statistics and Economic Studies (Insee) and the Treasury Directorate General (DG Trésor). This working paper presents the new version of the model, reestimated with the National Accounts data published in May 2016. Mesange displays Keynesian dynamics driven by aggregate demand in the short run but is pinned down in the long run by the supply side. The structure of the model, though similar to the previous version (Klein and Simon, 2010), is enriched to reflect the structural evolution of the French economy, to address the new challenges arising in public policy evaluation, and to better shed light on current economic debates. The French economy is modelled as a “small open economy” (exogenous international environment) and is broken down into five sectors (manufacturing, energy, tradable services exposed to international competition, non-tradable sheltered services and non-market sector). With respect to the previous version, the modelling of the labor market is substantially enriched with the distinction between skilled and unskilled labor force to account for the differentiated impact of targeted labour market policies.