Dynamic Models

The type of model you can use with RunDynam is based on the idea of starting with an initial database that, in many cases, represents the pre-simulation state of the economy. The model calculates the changes and percentage changes from the shocks applied to the model by solving the set of non-linear equations in the model. The initial database is then updated to make a new database which has the same structure as the initial database.

Models implemented in GEMPACK are usually of this form.

After the first year, the updated database for the first year is used as the initial data for the second year. Then the second year is solved and the updated database is used as the initial data for the third year and so on. In this way a sequence of linked annual simulations can be calculated.

Dynamic models often have additional links between years to incorporate physical capital accumulation, financial asset/liability accumulation and lagged adjustment processes.

This is described for the MONASH model in the MONASH Model book by Peter Dixon and Maureen Rimmer in section 2.1.

URL of this topic: www.copsmodels.com/webhelp/rundynam/hc_dynmod.htm

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