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

Appendix 5 Equations for the dynamic model

PRODUCTION BLOCK

NSR: NSR=1000000/(a1)*((YSR/1000000)**RHO -(A2A*KBF/1000000)**RHO)**(1/RHO),

RPYSR: RPYSR=RWA/(a1)*(((a1)*NSR/(A2A*KBF)) **(-RHO)+1)**((RHO-1)/RHO),

RPTSR: RPTSR=((RPYSR/A4A)**(DELTA/(DELTA-1)) +(RPM/(A3))**(DELTA/(DELTA-1)))**((DELTA-1)/DELTA),

RPYDMR: RPYDMR=A6A*(RPTSR**(THETA/(THETA-1)) -(RPTEX/(A5))**(THETA/(THETA-1)))**((THETA-1)/THETA),

TSR: TSR=A6A*YD*(RPYDMR/(A6A*RPTSR))**(1/(1-THETA)),

YSR: YSR=1/A4A*(TSR**DELTA-((A3)*IMSR)**DELTA)**(1/DELTA),

EXRSR: EXRSR=TSR/(A5) *(RPTEX/((A5)*RPTSR))**(1/(THETA-1)),

IMSR: IMSR=A4A*YSR/(A3)*((RPM/((A3)*RPTSR))**(DELTA/(1-DELTA))-1) **(-1/DELTA),

A1: A1=A1(-1)*EXP(BETA*0.25),

A3: A3=A3(-1)*EXP(π1*0.25),

A5: A5=A5(-1)*EXP(π2*0.25),

RGDP: RGDP=RPTEX*TEXP+RPYD*YD-RPM*IM+NGG*RWA

+CONH*RPCONH+RPTEX*IIE+POL4_EQ*RPYD*CONO,

GR: LOG(GR)=0.5*POPGR_EQ+0.5*POPGR_EQ(-1)

+0.5*(BETA*0.25)+0.5*(BETA(-1)*0.25),

REAL EXCHANGE RATES

RPM: RPM=(1+POL5_EQ)*PIMF/(RER),

RPTEX: RER=(PTEXF)/(RPTEX),

LDGPR: LDGDPR=LOG(DGDPR/FDGDPR),

RE: RE = (((0.25*ERE+0.25*ERE(-1)*EXP(INF_TAR)

+0.25*ERE(-2)*EXP(INF_TAR*2)+0.25*ERE(-3)*EXP(INF_TAR*3))

- 1.2* LDGDPR(4)-1.2*LDGDPR(5)) ),

RER: RER=(1-C1600)*RER(-1)*EXP(INF_TAR)+

C1600*RE*(1+RCS/400-INF) /(1+(RCSFB+RPRCS)/400-INFW)

LABOUR MARKET

NTS: PARTT=100*NTS/(RPOP3*(POP3+POP4)),

PARTT: PARTT= C2001*PARTT(-1)+C2002*(PARTT_EQ)+C2003*(NAIRU(-1)-URT(-1)),

NT: LOG(NT-NGG_EQ) = (C1001*LOG((NSR(-1))*EXP(POPGR_eq))

+(1-C1001)*LOG((NT(-1)-NGG_EQ(-1))*EXP(POPGR_eq)))+Z_NT,

POPGR_EQ: POPGR_EQ=LOG(POP3_EQ+POP4_EQ)

-LOG(POP3_EQ(-1)+POP4_EQ(-1)),

URT: URT=100*(1-NT/NTS),

CONSUMPTION SECTOR

COND: LOG(COND)=C0101+C0102*LOG((1-POL1)*RWA*(NT)+RTRPUPR

+RTROSPR+RMTRANSFER)+

(1-C0102)*LOG(RB-RZPA-ZP/RER+KH+KBF)-RLPCON,

RPCONHD: LOG(RPCONHD)=(C0200+C0202*LOG(CONH/CONO)+C0201*TREND) +LOG(1+POL4_EQ),

RPCONH: LOG(RPCONH/RPCONH(-1))=

C0601*LOG(RPCONH(-1)/RPCONH(-2))+C0602*(LOG(CONO(-1)/CONH(-1))

-LOG(CONO(-2)/CONH(-2)))+C0603*(LOG(RPCONH(-1)/RPCONHD(-1))),

CONO: CONO=CON-CONH,

CON: LOG(CON) = C0401*LOG(COND)+(1-C0401)*LOG(CON(-1)*GR)

+C0402*(YCURVE(-2))+C0403*(RPM(-1)-ERPM(-1))+

C404*(RPM(-2)-ERPM(-2))+Z_CON,

CONH: CONH=KSRATIO*KH,

RINCOME: RINCOME=(1-POL1)*RWA*(NT)+RTRPUPR

+RTROSPR+RMTRANSFER,

RWEALTH: RWEALTH= (RB-RZPA-ZP/RER+KH+KBF),

RLPCON: RLPCON=LOG((CONO*(1+POL4_EQ)+CONH*RPCONH)/CON),

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