A forecasting model of the Kenyan economy

A demand-oriented macroeconometric model of the Kenyan economy is developed and estimated in line with the cointegration technique. The estimated structure of the model is used to perform policy simulation experiments to determine the sensitivity of key macroeconomic variables to changes in exchange rate, net government current expenditure and nominal interest rate. The results of policy simulation experiments reveal that the exchange rate and fiscal policies are relatively more effective than the monetary policy, i.e. changing the nominal interest rate, in influencing the level of economic activity. The results point to the possibility of devaluation improving the international trade balance.     

A coopetitive model for the green economy

The paper proposes a coopetitive model for the Green Economy. It addresses the issue of the climate change policy and the creation and diffusion of low-carbon technologies. In the present paper the complex construct of coopetition is applied at macroeconomic level. The model, based on Game Theory, enables us to offer a set of possible solutions in a coopetitive context, allowing to find a Pareto solution in a win–win scenario. The model, which is based on the assumption that each country produces a level of output which is determined in a non-cooperative game of Cournot-type and that considers at the same time a coopetitive strategy regarding the low technologies, will suggest a solution that shows the convenience for each country to participate actively to a program of low carbon technologies within a coopetitive framework to address a policy of climate change, thus aiming at balancing the environmental imbalances.     

A macroeconomic rationing model of the belgian economy

This paper presents a small macroeconometric model that allows explicitly for the existence of rationing on the goods and labour markets and clearly distinguishes the three well-known regimes: Keynesian unemployment, classical unemployment and repressed inflation. The basic structure of the model contains two equations that can be estimated by single equation techniques. Estimation on Belgian postwar data establishes both the feasibility and the usefulness of the quantity rationing approach. Empirical results also reveal after 1972 an increasing discrepancy between the amount of labour supplied and the potential employment level determined by existing production capacities.     

A small-scale DSGE-VAR model for the Romanian economy

This paper describes the theoretical structure and the estimation results for a DSGE-VAR model for the Romanian economy, an inflation targeting country since 2005. Having as benchmark the New-Keynesian model of Rabanal and Rubio-Ramirez (2005), the main additional feature introduced refers to the extension to a small open economy setting in order to account for this specific aspect of the Romanian economy.Within the inflation targeting monetary policy regime, forecasts of central macro variables, inflation in particular, play an important part. Because inflation reacts to monetary measures with a considerable lag, the central bank's policy has to be forward-looking. Based on univariate measures of forecast performance, it is shown that the VAR with DSGE model prior produces forecasts that improve on those obtained using an unrestricted VAR model and the popular Minnesota prior in case of inflation, real exchange rate and nominal interest rate. Moreover, the DSGE-VAR model is informative about the structure of the economy and can help the “story-telling” in the central banks.     

A cointegrated structural VAR model of the Canadian economy

This paper implements a cointegrated structural VAR model of the Canadian economy using quarterly data over the period 1964–1994. The dynamic properties of the estimated model are compared to the predictions of a simple textbook macro model. Four long-run equilibrium relationships are tested: (i) consumption–income; (ii) consumption–wealth; (iii) money demand; and (iv) the Fisher equation. The empirical results obtained are generally consistent with the predictions of the textbook model's long-run implications, although level shifts are observed in the consumption/income and the wealth/income ratios. Similarly it is found that there was an increase in the ex post real interest rate, implying a level shift in the Fisher relation, following the Bank of Canada's policy change towards a stable price level target.     

A vector error-correction forecasting model of the US economy

Any research or policy analysis in economics must be consistent with the time-series properties of observed macroeconomic data. Numerous previous studies reinforce the need to specify correctly a model’s multivariate stochastic structure. This paper discusses in detail the specification of a vector error correction forecasting model that is anchored by long-run equilibrium relationships suggested by economic theory. The model includes six variables––the CPI, the GDP price index, real money balances (M1), the federal funds rate, the yield on long-term (10-year) government bonds, and real GDP––and four cointegrating vectors. The accuracy of VECM model forecasts for individual, univariate time series during for the 1990s is comparable to forecasts made by government agencies and private forecasters, perhaps because many forecasters share a similar implicit, long-run steady-state growth model of the economy. Judged by multivariate statistics that account for forecast-error covariance, VECM forecasts are found to be somewhat more accurate than a naïve random-walk alternative.     

A New Keynesian SVAR model of the Australian economy

We estimate an SVAR model for the Australian economy based on an open economy New Keynesian model that accounts for the forward-looking behaviour exhibited by economic agents. Deep structural parameters are identified by placing exclusion restrictions on the VAR residuals and the covariance matrix. Dynamic responses show no price and exchange rate puzzles and indicate that the Reserve Bank of Australia (RBA) stabilises output fluctuations in the short run while maintaining a medium-run inflation target since 1984. Aggregate demand shocks are found to be driven by external demands. The RBA exercises caution in responding to aggregate supply shocks.     

A dynamic simulation model of the world jute economy

This paper investigates both the sources of jute supply instability and the potential impact of an internationally managed buffer stock to stabilize market prices. The analysis is carried out utilizing a rather simple dynamic model of the markets for raw jute and jute goods. The model combines econometric estimates of the relevant parameters with a priori information derived from industry studies. It integrates the behavior of jute farmers in the principal jute growing countries with that of jute goods manufacturers and consumers using a series of region-specific demand and supply functions. Expected price variance is an explicit factor in determining jute acreage.     

Towards an information economy : The case of Singapore

Recent empirical studies have documented the emergence of information-based economies in developed countries within Europe, the U.S.A., Japan, and Australia. Casual observations suggest that the newly industrializing country of Singapore is proceeding towards a similar trend. The primary purpose of this paper is to account for the share of Singapore's national product which originates from informational activities. In particular, we define and estimate the size of Singapore's information sector within an input-output framework. Our results indicated that a sizable portion of Singapore's economy is information-based. In view of the significant penetration of informational activities in economic production, advances in communication technology and concomitant improvements in information-handling capabilities are bound to affect factor productivities and incomes with consequences for a country's pattern of employment and production structure. It is anticipated that an economics of communication becomes necessary for an awareness of communication technology as a choice variable in economic planning. We conclude our discussion with an assessment of the admissability of an information sector concept in economic analysis and the usefulness of empirical studies based on such a concept.     

A general model for short-term interest rates

A general one-factor model for short-term interest rates is proposed. Besides the long memory fractionally integrated mean process, the model also consists of a power function of the interest rate as well as the GARCH effect in the conditional variance. The estimation results show that, while there is no evidence for fractional integration in the mean beyond the well-known martingale property, both the power function of the interest rate and the GARCH effect (but not the ARCH effect) are highly significant in the formation of the conditional variance. Test results also confirm a structure change in October 1979 due to the shift in the Federal Reserve monetary policy.     

Simulation model of the polish economy

This paper presents some results of the simulation model of the Polish economy in transition from the planned to market one. The simulation model is nonlinear and dynamic. It consists of 800 balance equations, 40 of which are difference state equations. The basic time unit is one quarter while the calculation horizon spans between three and 10 years. It was calibrated to the 1994–96 statistical data. The model contains the aggregates of production (divided between the state and private sectors and three production branches), households, public sector, banking system, and foreign trade. The simulation attempts to forecast chosen macroeconomic variables resulting from different scenarios. Sets of effective (Pareto-optimal) solutions and effective growth paths of economy were obtained. The simulation results help to better understand the macroeconomic process in the transition period and can be useful for central-level decisionmakers. This work was partially supported by grant No. 1 HO2B 023 09 from Komitet Badan Naukowych (Polish State Committee for Scientific Research).     

A dependent economy model of public expenditure and the exchange rate

This paper examines the impact of public expenditure shocks on the exchange rate and the external accounts in a macroeconomic model of exchange rate determination. It extends the dependent economy approach to the open economy based on the tradables/nontradables dichotomy by incorporating international capital flows and intertemporal adjustment. Consistent with empirical evidence on exchange rate behavior, yet contrary to a major result of the popular Mundell-Fleming approach, this model suggests that fiscal expansion attributable to increased public expenditure usually causes exchange rate depreciation, not appreciation. However, if the increased public spending is on investment, the exchange rate is neutrally affected.     

A small New Keynesian state space model of the Australian economy

Using a small New Keynesian state space macroeconomic model, we apply maximum likelihood estimation and the Kalman filter to obtain joint estimates of the unobservable medium-run paths of potential output and its normal rate of growth, the NAIRU, the neutral real interest rate and the subjective discount factor for Australia from 1984Q1 to 2006Q4. Using the estimated model we obtain dynamic forecasts for output, unemployment, and inflation to compare with the actual data from 2007Q1 to 2008Q4. Combining the estimated model with a monetary policy rule, we examine impulse responses of inflation and the output and unemployment gaps to shocks associated with the global financial crisis of 2008.     

A disequilibrium macroeconomic model of the Belgian economy : The Maribel II model of the Planning Bureau

This paper describes the Maribel II model, a model used by the Belgian Planning Bureau for analysing and simulating macroeconomic changes in the Belgian economy. Its main feature is that it is a disequilibrium model (for both the product and the labour market). During the construction of the model considerable attention was given to its theoretical underpinning. The steady state properties show that the mechanisms are mainly classical with a strong dependence on foreign influences. The multiplier analysis confirms the relatively small multipliers in Belgium and also shows the richness that a disequilibrium model provides for analysing particular policies.     

IS model: A general model of forecasting and its applications in science and the economy

Expanding the work of Marchetti and Modis on Lotka-Volterra competition systems, a general model of Interaction Systems (IS) is introduced to describe the dynamics of multiple member interactions among different populations concerning not only biological systems but other types of systems as well. The new IS model provides us with a general framework of analysis and forecasting, where all parameters, variables, and interactions have real meaning, by using basic knowledge of each system.The proposed model can be applied to many different fields covering economic, business, social, physical, and other phenomena giving us both numerical estimates and qualitative insights of the system's dynamics. This is illustrated in two case studies. In the first case, the IS model is applied to elementary chemical reactions in order to quantify the reactions' kinetics. The result is the well known rate law of chemical reactions kinetics thus providing evidence of the proposed model's validity. In the second case, the IS model is applied to the global economy. The resulting model is tested against real global GDP data. The new IS model gave reliable estimates and proved to be considerably more accurate as compared to a similar forecast of global GDP based on the logistic growth model. Furthermore, the new model presented a basic framework of understanding the nature of major economic shifts, including the recent global recession of 2009, by studying the dynamic relationship between demand and supply.     

A dynamic model of firm behavior in a planned economy

Conclusion This paper presents a dynamic model of the interaction between the planning authority and a firm in a centrally planned economy with emphasis on the firm's decision-making process and its results, given the overall constraints imposed by the planners. For possible relationships between the actual and target levels of output over time, the model offers either the case of an initial period of under-fulfillment followed by a period of overfulfillment or the case of continuous overfulfillment. We have also determined how a firm reacts to the planning authority changing one of its overall constraints (the final target or the length of the time period) or one of the parameters of the firm's bonus function. It is crucial for the planning authority to have a good understanding of what a firm's response to any of these changes will be in order to be able to select an optimal strategy in light of the ultimate goals of the planning mechanism. The results of our paper offer useful insights for this selection process.     

Inflation model of a semicommand economy

A semicommand economy can be defined as a system where the pricing of goods is influenced by the market but where the prices of production factors are under control of the state. The model presents various pricing and economic policy measures to deal with inflation. It is constructed as a dynamic supply-side focused, input-output model which differentiates nominal and real movements. It examines the possible responses of prices and the volume of production to certain measures or programmes to counteract inflation. The cases described are based on the present day Yugoslav economy.     

Estimation of an equilibrium model for Singapore fertility

The authors present a quantification of the economic influences on family size decisions for the childbearing sector of the Singapore population, using the approach developed by Easterlin. They introduce a modification to the Easterlin theory to reflect the impact of Singapore government intervention designed to lower fertility. The fertility functions of Singapore females are estimated as time series from yearly data under the assumption that the government program will continue to effectively reduce fertility to replacement levels. A forecast of future fertility based on a Monte Carlo method of generating the random part of the forecast fertility functions is also presented     

Von Thünen's model of the dual economy

We are indebted to Heinz König, John Mellor, and Hans van Beek, and to three anonymous referees of the journal for helpful comments, and to Victoria Dalko for her able research assistance. Financial assistance from the Foerder Institute for Economic Research and the International Food Policy Research Institute is gratefully acknowledged. A version of the paper also appears as Working Paper No. 989 of the Foerder Institute and Discussion Paper No. A 269 of the University of Bonn.     

A time-domain transfer function model of Wagner's Law: the case of the United Kingdom economy

The dynamic relationship which is implied by Wagner's Law is well established in the literature. However, the methodology which has been applied to investigate this dynamic relationship has tended to avoid a dynamic specification. This paper investigates Wagner's Law employing transfer function methodology in the time-domain for the UK over the period 1946–85.