|
Summary of the Model
Three
separate but related models are used - MSG model, the G-Cubed model and
G-Cubed (Asia Pacific). These models all have the same underlying
theory, and similar data and parameters. They vary in their emphasis on
sectors and regions. The G-Cubed model is most relevant to questions of
the energy sector while the Asia-Pacific version focuses on the
Asia-Pacific region.
The framework is a global economy wide
model accounting for interactions between sectors and between regions.
The model is a fully dynamic model with considerable macroeconomic
detail, incorporating both real sector and financial sector
interactions.
As a dynamic model, it explicitly describes the
time path of the effects of scenarios. With its macroeconomic detail and
integrated real and financial markets, the model can account for
changes in interest rates, exchange rates and international capital
movements. Expectations are incorporated into the model.
The
model also accounts for the effects of different fiscal and monetary
responses to global events and the way in which future policy changes
can affect economic activity. Adjustment costs associated with the
reallocation of resources in response to scenarios are taken into
account. Households and firms are modelled as optimising behaviour over
time and a government sector is included that must satisfy intertemporal
constraints on borrowing and lending. A complete listing of equations,
variables and more can be found on www.msgpl.com.au.
|