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A Dynamic Computable General Equilibrium (CGE) Model of the New Zealand Economy - WP 02/07

Publication Details

  • A Dynamic Computable General Equilibrium (CGE) Model of the New Zealand Economy
  • Published: Aug 2002
  • Status: Current
  • Author: Szeto, Kam Leong
  • JEL Classification: C51; E23
  • Hard copy: Available in HTML and PDF formats only.
 

A dynamic computable general equilibrium (CGE) model of the New Zealand economy

New Zealand Treasury Working Paper 02/07

Published: June 2002

Author: Kam Leong Szeto

Abstract

This paper documents the structure and key properties of a computable general equilibrium (CGE) model of the New Zealand economy. It is a three-good, small open economy model, which features a well-developed production block. This production block has been estimated as a system using Full Information Maximum Likelihood. Another key feature of the model is that it has a two–tiered structure: the steady-state version of the model and the dynamic version of the model. Using the steady-state version of the model, a macroeconomic balance measure of New Zealand’s equilibrium exchange rate can be derived. Furthermore, the steady–state model provides estimates of potential output, which is used to measure the level of excess demand in the economy. The dynamic model is used to trace the dynamic response of a range of macroeconomic variables to various shocks such as changes to world prices for exports and changes to government policy.

Table of Contents

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Abstract

Table of Contents

List of Tables

List of Figures

1 Introduction

2 The Steady-state Model

3 The steady state

4 Steady-state model simulation

5 Dynamic structure

6 The dynamic properties of the model

7 Concluding comments

References

Appendix 1 Variable Listing

Appendix 2 Equations for the steady state model

Appendix 3 Consumption equation

Appendix 4 Demand for housing services

Appendix 5 Equations for the dynamic model

twp02-07.pdf (568 KB) pp. 68

List of Tables

List of Figures

Acknowledgements

I wish to thank Paul Gardiner and Nathan McLellan for their contribution to the development of this model through discussions and assistance with sections of this paper. This paper has been a long time in preparation. It benefited from comments on the early version of the paper from Bob Buckle, Viv Hall, and Roger Ridley. I would like to thank James Twaddle for his comments as discussant at the Australasian Macroeconomics Workshop, 4-5 April 2002.

Disclaimer

The views expressed in this Working Paper are those of the author(s) and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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