December 2012 MacSim A software to evaluate macroeconomic policies J EAN -L OUIS B RILLET G ILBERT C ETTE I AN G AMBINI T HOMAS L AGOARDE -S EGOT 1
T HE S OFTWARE M AC S IM General summary December 2012 General summary I. The framework of MacSim II. The real economy III. The financial aspects: framework and options IV. The modifiable coefficients and the possible shocks V. The mechanisms in action VI. Some examples of simulations VII. Conclusion: The strong points of MacSim Brillet, Cette and Gambini 2
T HE S OFTWARE M AC S IM General summary Part I December 2012 I. The framework of MacSim I.1 General characteristics I.2 The possible macroeconomic policies I.3 The objective relation II. The real economy III. The financial aspects: framework and options IV. The modifiable coefficients and the possible shocks V. The mechanisms in action VI. Some examples of simulations VII. Conclusion: The strong points of MacSim Brillet, Cette and Gambini 3
T HE S OFTWARE M AC S IM I. The framework of MacSim December 2012 I.1 General characteristics � MacSim is a software to evaluate policies and not to realise forecasts � User-friendly � Neo-keynesian framework � With real and financial restoring forces � Adapted to the evaluation of macroeconomic policies, for example fiscal ones � In the current context, particularly adapted to the evaluation of: – recovery plans – consolidation plans – structural policies � MacSim1: Published in 2001 (Editions MontChrestien) � MacSim2: Published in 2012 (Editions Economica) Improvment of operational dimension Brillet, Cette and Gambini 4
T HE S OFTWARE M AC S IM I. The framework of MacSim December 2012 I.1 General characteristics � Multinational modelisation 10 individualised and active economies: Germany, Belgium, France, Italy, Luxembourg, Netherlands, other countries of euro zone, United Kingdom, USA, Japan The Rest of the World (ROW) is passive � Country models are identical. Composed of 50 to 60 relations 10 to 15 of which are econometric with some long term constraints � Econometric relations are usually Error Correction Models (ECM) � There exists an implicit unemployment equilibrium rate for each country � The fiscal policies do not influence the very long term equilibrium � The structural policies may influence the very long term equilibrium For example: productivity shocks, active population shocks… Brillet, Cette and Gambini 5
T HE S OFTWARE M AC S IM I. The framework of MacSim December 2012 I.1 General characteristics � MacSim is estimated on quarterly data The simulations are also realised on quarterly data � The simulation results are given: Through Tables on annual data Through Graphs on quarterly data � High ergonomy to access to simulation results, by chapter: main results, prices, external trade, labour market, public finance, firms, households… Brillet, Cette and Gambini 6
T HE S OFTWARE M AC S IM I. The framework of MacSim December 2012 I.2 The possible macroeconomic policies For each economy, 11 macroeconomic policy types: 1. Public Administration employment 2. Average wage gap between public sector and private sector employment 3. Real global demand of Public Administrations 4. Social benefits received by households 5. Average income tax rate of the households 6. Employee social contribution rate 7. Employer social contribution rate 8. Average tax rate on company profits 9. Rate of subsidies received by companies 10. Average VAT rate 11. Average tax rate on imports from each country and from the ROW Brillet, Cette and Gambini 7
T HE S OFTWARE M AC S IM I. The framework of MacSim December 2012 I.3 The objective relation To evaluate in a synthetic way the performances of the simulated policies Linear relation: R = a1.EA - a2.EB - a3.EC + a4.ED + a5.EE Prefixe E : Gap with the reference count (in % for A and by point for other variables) A : GDP Volume B : Unemployment rate C : Inflation rate D : Government balance (in pt of GDP) E : Trade balance (in pt of GDP) By default: a1 = 0.15 ; a2 = 0.10 ; a3 = a4 = a5 = 0.25 These values may be changed Brillet, Cette and Gambini 8
T HE S OFTWARE M AC S IM General summary Part II December 2012 I. The framework of MacSim II. The real economy II.1 The country models II.2 The production function II.3 Prices and wages II.4 The external trade II.5 Others III. The financial aspects: framework and options IV. The modifiable coefficients and the possible shocks V. The mechanisms in action VI. Some examples of simulation VII. Conclusion: The strong points of MacSim Brillet, Cette and Gambini 9
Total factor productivity Value added Capital Capacity Employ. desired desired desired Public Total Employ. Capital Capacity Invest. employment Employ. realised realised realised realised Factor Capacity Working Active Relative Unemply. Age utilis. Popul. cost rate population Foreign prices Competit. VAT, Other indirect taxes, Mondial Employer social Wages demand Prices contributions Exports Household, Firm Imports Income tax and Public administration Profit tax Incomes and financial situation Employee social contributions Social benefits Internal demand: Consumption, Investments, Inventory changes Public demand Public demand
T HE S OFTWARE M AC S IM II. The real economy december 2012 II.2 The production function � Cobb-Douglas production function Unitary elasticity of substitution in the long term � Investment : TFP Accelerator (Production and tensions) Relative cost of production factors Profits � Employment: TFP Accelerator (Production) Relative cost of production factors Brillet, Cette and Gambini 11
T HE S OFTWARE M AC S IM II. The real economy December 2012 II.3 Prices and wages � Modelisation: WS – PS logic � Value added price: Profit share target Tensions � Average wage: Implicit profit share target Inflation Unemployment rate Brillet, Cette and Gambini 12
T HE S OFTWARE M AC S IM II. The real economy December 2012 II.4 The external trade � Bilateral import volumes Internal demand multilateral price competitiveness Relative tensions � Bilateral export volumes From bilateral import volumes � Bilateral export prices Geometric average of production prices (modulo exchange rate) and of external prices Import taxes � Bilateral import prices From bilateral export prices � Trade matrix between the 10 economies and the ROW Brillet, Cette and Gambini 13
T HE S OFTWARE M AC S IM II. The real economy December 2012 II.5 Others � Unemployment Employment Active population Participation rate changes � Household demand Savings rate target influenced by: – Inflation – Unemployment rate Brillet, Cette and Gambini 14
T HE S OFTWARE M AC S IM General summary Part III December 2012 I. The framework of MacSim II. The real economy III. The financial aspects: framework and options III.1 The general framework III.2 The interest rates III.3 The exchange rates III.4 The possible Monetary Union IV. The modifiable coefficients and the possible shocks V. The mechanisms in action VI. Some examples of simulations VII. Conclusion: The strong points of MacSim Brillet, Cette and Gambini 15
T HE S OFTWARE M AC S IM III. The financial aspects: framework and December 2012 options III.1 The general framework Brillet, Cette and Gambini 16
december 2012 options III.1 The general framework Brillet, Cette and Gambini 17
T HE S OFTWARE M AC S IM III. The financial aspects: framework and December 2012 options III.2 The interest rates � Short term interest rates: 3 options 1. Stable nominal short term interest rates 2. Stable real short term interest rates 3. Taylor rule Risk premium linked to the public finance deficit � Long term interest rates Smoothed changes of short term rates III.3 The exchange rates � Three options A. Stable nominal exchange rates B. Stable real exchange rates (PPP) C. Uncovered interest rate parity Brillet, Cette and Gambini 18
T HE S OFTWARE M AC S IM III. The financial aspects: framework and December 2012 options III.4 The possible Monetary Union � Possible to constituate a Monetary Union (MU) The composition of the MU is chosen at the beginning of the use Same short term interest rates in the MU The long term interest rates may differ (risk premium) Same exchange rates in the MU � The MU is symetric: The MU monetary policy depends on the average situation Brillet, Cette and Gambini 19
T HE S OFTWARE M AC S IM General summary Part IV December 2012 I. The framework of MacSim II. The real economy III. The financial aspects: framework and options IV. The modifiable coefficients and the possible shocks IV.1 The modifiable coefficients IV.2 The possible shocks V. The mechanisms in action VI. Some examples of simulations VII. Conclusion: The strong points of MacSim Brillet, Cette and Gambini 20
T HE S OFTWARE M AC S IM IV. The modifiable coefficients and the December 2012 possible shocks IV.1 The modifiable coefficients At the initialisation step � The 3 import price elasticities and then the export price elasticities Same for all economies � The risk premium coefficient Country specific � The Taylor rule coefficients Same for all economies � The objective relation coefficients Same for all economies Brillet, Cette and Gambini 21
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