Author: James Giesecke
The paper describes historical and decomposition simulations of the Australian economy undertaken with the MONASH model. The simulations cover the period 1996/97 to 2001/02. The paper first describes the historical simulation. In the historical simulation, many of those sectoral variables in MONASH which represent observable features of the economy are determined exogenously. This allows the model to calculate the outcomes for sectoral variables describing (typically unobservable) features of the economy's structure, such as industry production technologies and household tastes. The estimates for these structural and taste variables play a key role in explaining the observable features of the economy over the study period. To isolate the contribution of each of these structural features to observed economic outcomes, they are fed back into the model as exogenous shocks in the decomposition simulation. The decomposition simulation is then used to explain the causes of major changes in the Australian economy over the period 1996/97 - 2001/02 in terms of changes in technologies, tastes and other structural variables.
JEL classification: D58, O39, O47
Please cite the later published version in:
'The effects of recent structural, policy and external shocks to the Australian economy, 1996/97 - 2001/02', Australian Economic Papers, Vol.
47(1), March 2008, pp. 15-37.
Working Paper Number G-151 can be downloaded in PDF format.
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