Workshop on Macroeconomic Modelling in Asia and the Pacific the Sce… · John Keynes (1936) Ragnar...

Workshop on Macroeconomic Modelling in Asia and the Pacific

8-10 December 2015United Nations Conference Centre, MR-A

Bangkok, Thailand

Worksop on Macroeconomic Modelling in Asia and the Pacific

Setting the Stage

Sudip Ranjan BasuEconomist

8 December 2015

2

Outline

Worksop on Macroeconomic Modelling in Asia and the Pacific

• A brief review of macromodels

• Initiatives at United Nations

• Way forward

• Structure of workshop

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Worksop on Macroeconomic Modelling in Asia and the Pacific

A brief review of macromodels

4

Over 90 years of macromodels “science is a public knowledge, reproducible knowledge”

Worksop on Macroeconomic Modelling in Asia and the Pacific

0

1

2

3

4

5

6

7

8

GD

P g

row

th (

%)

Great Depression(1929)

John Keynes(1936)

Ragnar Frisch(1932)

Lawrence Klein ‘ Brookings-SSRC model project’ (1964-1969)

UN SDGs(2015-2030)

Great Recession(2007/2008)

Asian Financial Crisis(1997/1998)Oil Crisis

(1973) US Economic Recession(1990/1991)

Cowles Commission/Foundations

(1932/1955)

Hendry(1995)

Jan Tinbergen(1935)

Source: Sudip Ranjan Basu, based on Historical Statistics of the World Economy: 1-2008 AD, (Copyright Angus Maddison)

Klein-Goldberger(1955)

UN MDG(2000-2015)

Latin American Debt Crisis(1980s)

DSGE-Kydland & Prescott(1982)

UN Project LINK(1969)

World bank-IMF-OECD Global Multi-Country Models

(1990s)

Lucas Critique: Rational expectation (1976)

Sims Critique-VAR+SVAR/GVAR (1980)

Age of Klein

Klein CQM (2002-2009)

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UNCTAD(1968)

Over 90 years of macromodels

Worksop on Macroeconomic Modelling in Asia and the Pacific

• Looking backward –reminiscing and looking forward –dreaming

• Development of macromodel followed economic theories and thoughts

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Objectives of macromodels

Worksop on Macroeconomic Modelling in Asia and the Pacific

• Forecasting

• Policy simulation

• Lessons learnt– Policy modelers need to be in touch with emerging policy priorities and constraints and

engaged in frequent dialogue with policymakers

– Important part of efficient policymaking-decision makers to act rationally by making them fully aware of the repercussions and of the potential policy reforms to steer economy –wide impact analysis

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Constructing macromodels

Worksop on Macroeconomic Modelling in Asia and the Pacific

• Data requirements

• Technical framework

• Trained manpower

• Financial resources

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Types of macromodels

Worksop on Macroeconomic Modelling in Asia and the Pacific

• Characteristics of models (eg, Keynesian type)

• Frequency –Annual + high-frequency (quarterly and monthly)

• Size of models

• Sectors, and linkages

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Prototype macromodel from national to multi-country

Worksop on Macroeconomic Modelling in Asia and the Pacific

• Comparison of the different time-series

• Check estimated coefficients

• External shocks

• Lessons learnt:

– One country model is at great variance with others, behavioral equations have not been adequately estimated

– Some equations have to be estimated in different countries-often has be re-specified and re-estimated several times

– Iterations leads to the formulation of general and robust equations to simulate the working of economic relationships

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Worksop on Macroeconomic Modelling in Asia and the Pacific

Initiatives at United Nations

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Models at UN system

Worksop on Macroeconomic Modelling in Asia and the Pacific

• UN/UNCTAD Model, since 1968..

• UN/UNDESA Project LINK, since 1969..

• Regional UN models– ECAFE/ESCAP

– ECLAC

– ECE

– ECA

– ESCWA

• World Bank-IMF-OECD

• Regional Development Banks– Asian Development Bank

– Inter-American Development Bank 12

Worksop on Macroeconomic Modelling in Asia and the Pacific

Way forward

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Global and regional context

Worksop on Macroeconomic Modelling in Asia and the Pacific

• Regional macroeconomic policy spillover

• Trade policies, including protectionism

• Financial sector linkages

• Dependence on primary commodities

• Income inequality

• Energy sector & climate change

• 2030 Agenda for Sustainable Development

– Sustainable Development Goals14

Worksop on Macroeconomic Modelling in Asia and the Pacific

Structure of workshop

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Workshop-cum-Training

Worksop on Macroeconomic Modelling in Asia and the Pacific

• Day 1, 8 December 2015

– Country Presentations

• Day 2, 9 December 2015

– Country Presentations

– Special Presentations

• Day 3, 10 December 2015

– Building national macromodels

• Way forward:

– Recommendations

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High-level Policy Dialogue on the Strategic Regional Partnershipfor 2030 Agenda for Sustainable Development in Asia and the Pacific

Macroeconomic Policy and Development Division

Email: basu@un.org

Tel: +662288152417