Using the Murphy Model to Provide Short-Run Macroeconomics Closure for Orani

James H. Breece, Keith R. McLaren, Chris W. Murphy and Alan Powell

No 267294, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper gives details of an interface constructed to allow the coupling of the ORANI applied general equilibrium model and the Murphy macrodynamic model. It shows how the previously developed methodology for interfacing a continuous-time macro model with a comparative static general equilibrium model (Cooper, McLaren and Powell (1985)) can be adapted to accommodate a macro model formulated in discrete time. The Murphy Model (MM) includes a model of the housing sector. This allows the interfaced ORANI/MM system to have investment in housing activity determined by MM, which (unlike ORANI) links housing investment directly to conditions in financial markets. A by-product of the interfacing procedure is an empirical estimate of the ORANI short run. Under a calibrating shock in which real government spending increases permanently by 10 per cent relative to control, and this fiscal expansion is financed about equiproportionately from bond issue and monetary expansion, the estimated ORANI short run turns out to be eight quarters, confirming earlier work. It was found possible to solve for 'as-if' shocks in the macroeconomic environment which, when injected into ORANI in stand-alone mode, would reproduce the macroeconomic projections of MM to a good first approximation. Thus it proved possible to use ORANI to disaggregate to the level of 112 industries the macroeconomic projections produced by MM.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 40
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Related works:
Journal Article: Using the Murphy Model to Provide Short‐run Macroeconomic Closure for ORANI (1994)
Working Paper: Using the Murphy Model to Provide Short-Run Macroeconomic Closure for Orani (1991)
Working Paper: Using the Murphy Model to Provide Short-Run Macroeconomic Closure for ORANI (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267294

DOI: 10.22004/ag.econ.267294

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