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Supply, Liquidity and Credit: a New Version of the Institute's Domestic Econometric Macromodel

Published online by Cambridge University Press:  26 March 2020

Simon Wren-Lewis
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Extract

The forecast presented in chapter 1 was produced with a new version of the Institute's UK econometric model. Model 11 contains a number of new features. The largest number of innovations occur on the ‘supply side’ of the model, including new equations for manufacturing employment, investment, exports, imports prices and average earnings. Two equally important developments involve the interaction between company sector liquidity and decisions about real variables, and between the flow of consumer credit and personal consumption. There are new equations for the exchange rate, unemployment and a host of more minor variables. In all about half of the model's equations have been re-estimated, and 30 new variables added to the model. These changes constitute the largest and most significant development of the Institute's UK model since the introduction of rational expectations with Model 8. This note summarises these changes, and discusses their implications for various standard policy simulations. A full model listing is also published by the Institute.

Type
Articles
Information
National Institute Economic Review , Volume 126 , November 1988 , pp. 32 - 43
Copyright
Copyright © 1988 National Institute of Economic and Social Research

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Footnotes

∗

This note reports the results of research to which every member of the Institute's macroeconomic modelling team has contributed. In addition results on company sector liquidity are the fruits of cooperation with Jonathan Ireland working as part of an ESRC funded project on Disequilibrium Monetary Modelling in the Macro Economy headed by James Davidson. The new equations for earnings were estimated by Reza Moghadam of Warwick University. Responsibility for the description of all the results presented here rests with myself alone. The Institute's macroeconomic modelling programme is funded by the ESRC.

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