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Modification of the GE-IO model of the Russian economy with dynamic optimization of macroeconomic policy

Author

Listed:
  • Gilmundinov, Vadim
  • Bozo, Natalia
  • Melnikov, Vladimir
  • Petrov, Sergei

Abstract

The paper describes recent results connected with extension of the general equilibrium input-output model of Russia with aggregated markets (Gilmundinov et al, 2015). Consideration of economic policy’s influence on a variety of macroeconomic and structural policy goals is an aim of this extension. For this purpose we add into GE-IO model sectoral fixed capital investment’s sub-models and sub-model of dynamic optimization of economic policy. Sectoral sub-models of fixed capital investments are based on the assessments of sectoral production functions with variable degree of capacity use. Sub-model of dynamic optimization of economic policy is based on extension of basic approaches suggested by H. Theil (1954, 1964), J. Tinbergen (1952) and R. Mundell (1962) with dynamic social losses function and accounting of influence of economic policy on sectoral structure of national economy. The suggested modification allows to simulate impact of different variants of economic policy on national economy, aggregated markets and main sectors. That is very helpful for estimation of consequences of various internal and external shocks and development of optimal economic policy and gives more advantages in comparison with standard DSGE or CGE models. The preliminary results of simulations based on suggested model for the Russian economy show considerable dependence of the Russian economy dynamic and structure on economic policy. Optimal economic policy should be hybrid with combining structural policy with sectoral credit policy of Central Bank. According to the basic scenario of simulation with neutral economic policy the Russian GDP in constant prices will decline at 1.8% in 2016 in comparison to 2015 and almost have no changes in 2017 in comparison to 2016. Stimulating economic policy allows to raise growth rates of the Russian economy at 2-3%.

Suggested Citation

  • Gilmundinov, Vadim & Bozo, Natalia & Melnikov, Vladimir & Petrov, Sergei, 2016. "Modification of the GE-IO model of the Russian economy with dynamic optimization of macroeconomic policy," MPRA Paper 75597, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75597
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    References listed on IDEAS

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    1. Robert A. Mundell, 1960. "The Monetary Dynamics of International Adjustment under Fixed and Flexible Exchange Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 74(2), pages 227-257.
    2. Robert A. Mundell, 1962. "The Appropriate Use of Monetary and Fiscal Policy for Internal and External Stability," IMF Staff Papers, Palgrave Macmillan, vol. 9(1), pages 70-79, March.
    3. Jordi Galí, 2008. "Introduction to Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework," Introductory Chapters, in: Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press.
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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