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Workshop on Macroeconomic Modelling in Asia and the Pacific 8-10 December 2015 United Nations Conference Centre, MR-A Bangkok, Thailand Worksop on Macroeconomic Modelling in Asia and the Pacific Setting the Stage Sudip Ranjan Basu Economist 8 December 2015 2 Worksop on Macroeconomic Modelling in Asia and the Pacific Outline • • • • A brief review of macromodels Initiatives at United Nations Way forward Structure of workshop 3 Worksop on Macroeconomic Modelling in Asia and the Pacific A brief review of macromodels 4 Worksop on Macroeconomic Modelling in Asia and the Pacific Over 90 years of macromodels “science is a public knowledge, reproducible knowledge” 8 Lawrence Klein ‘ Brookings-SSRC model project’ (1964-1969) UNCTAD Jan Tinbergen (1968) UN Project LINK Cowles (1935) (1969) Commission/Foundations Ragnar Frisch (1932) 7 (1932/1955) UN SDGs (2015-2030) Sims CritiqueVAR+SVAR/GVAR (1980) World bank-IMF-OECD Global Multi-Country Models (1990s) DSGE-Kydland & Prescott (1982) 6 Klein CQM (2002-2009) Lucas Critique: Rational expectation (1976) GDP growth (%) 5 UN MDG (2000-2015) Hendry (1995) 4 3 John Keynes (1936) Great Recession (2007/2008) Klein-Goldberger (1955) 2 1 Great Depression (1929) Oil Crisis (1973) Latin American Debt Crisis (1980s) Age of Klein US Economic Recession (1990/1991) Asian Financial Crisis (1997/1998) 0 5 Source: Sudip Ranjan Basu, based on Historical Statistics of the World Economy: 1-2008 AD, (Copyright Angus Maddison) Worksop on Macroeconomic Modelling in Asia and the Pacific Over 90 years of macromodels • Looking backward –reminiscing and looking forward –dreaming • Development of macromodel followed economic theories and thoughts 6 Worksop on Macroeconomic Modelling in Asia and the Pacific Objectives of macromodels • 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 7 Worksop on Macroeconomic Modelling in Asia and the Pacific Constructing macromodels • Data requirements • Technical framework • Trained manpower • Financial resources 8 Worksop on Macroeconomic Modelling in Asia and the Pacific Types of macromodels • Characteristics of models (eg, Keynesian type) • Frequency –Annual + high-frequency (quarterly and monthly) • Size of models • Sectors, and linkages 9 Worksop on Macroeconomic Modelling in Asia and the Pacific Prototype macromodel from national to multi-country • 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 10 Worksop on Macroeconomic Modelling in Asia and the Pacific Initiatives at United Nations 11 Worksop on Macroeconomic Modelling in Asia and the Pacific Models at UN system • 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 13 Worksop on Macroeconomic Modelling in Asia and the Pacific Global and regional context • • • • • • 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 Goals 14 Worksop on Macroeconomic Modelling in Asia and the Pacific Structure of workshop 15 Worksop on Macroeconomic Modelling in Asia and the Pacific Workshop-cum-Training • 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 16 High-level Policy Dialogue on the Strategic Regional Partnership for 2030 Agenda for Sustainable Development in Asia and the Pacific Macroeconomic Policy and Development Division Email: [email protected] Tel: +6622881524 17