Multisectoral econometric models of the centrally planned economies and the disequilibria

The paper provides a systematic analysis of the properties of large econometric macro models built for the Centrally Planned economies of the '70s and '80s. A specific typology of macro models is introduced, distinguishing between the demand and quasi-demand determined systems on the one hand and the supply and quasi-supply determined systems on the other, and also between complete and incomplete models specifying only one side of economic activities (i.e. generating either demand or supply). It is shown that, under the command type economy, the incomplete, fully supply determined systems prevailed, generating production and showing its allocation. The economic reforms of the '80s, which aimed at a slow transition towards market economies, brought about a tendency towards constructing complete quasi-supply determined systems (especially for Poland and the CSRS). Since, in principle, they were built for shortage economies, the model builders had to allow for unobservables (final and intermediate demand, capacity utilization) and, on the other hand, for an increasing role of the financial phenomena (including prices) and financial policy instruments. A summary of the applications of macro models in forecasting and policy simulations is provided and new tendencies associated with regaining economic equilibria and approaching the market mechanisms emerging in the period of transition are shown.This is a revised and extended version of our paper delivered at the Project LINK Meeting in Paris, 1989 (see W. Welfe 1989b), which made use of our earlier publication (W. Welfe 1988).     

A Knowledge-Based Economy: New Directions of Macromodelling

Development of “new economies” leading to economies mostly based on knowledge implies the construction of new long-term macroeconometric models. They should incorporate the impacts of new technologies being endogenized, as well as human capital. The paper discusses several issues related to the extension of the notion of production function. They cover first of all the measurement and explanation of total factor productivity (TFP), the role of domestic and foreign R&D expenditures, as well as educational expenditures. The discussion is extended to include proposals to construct new submodels explaining the sections of research and education and also the ICT industries.

Long-term macroeconometric models: The case of Poland

Long-term forecasts and scenario analysis should be based on macroeconometric models. The core of long-term models is extended by introducing production functions generating potential output. Their specification includes total factor productivity (TFP) being representative of technological progress. It depends on knowledge capital, i.e. human capital, domestic and foreign R&D. Several channels of transfer of foreign R&D can be distinguished.The potential output differs from the effective output, representing final demand, underlying business cycle fluctuations. To study potential disequilibria a system of equations explaining final demand must be established.Thus the long-term macroeconometric model must be a complete model. Its use may cover long-term forecasts and scenario analysis based on model simulations.The paper outlines the above specifications of the long-term model using as example a new model of the Polish economy. The model is medium-sized. It covers demand and supply side, including prices and financial flows. The results of multiplier analysis are shown revealing model feedbacks, including generation of business cycles. The results of its application are shown: long-term forecasts up to the year 2030 as well as scenarios of development of the Polish economy, including recession scenario.