Rational Expectations for Large Models: a Practical Algorithm and a Policy Application

Peter B. Dixon, Ken Pearson, Mark Picton and Maureen T. Rimmer

No 331106, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper describes a practical and conceptually simple iterative method for solving large dynamic CGE models under rational expectations. Details are given for the MONASH model of Australia but the general approach could be applied to a wide range of dynamic models. The method has been automated in the RunMONASH Windows software. This software provided a natural starting point for developing an automated procedure for conducting policy analysis under rational expectations because it already performed this function for static expectations. RunMONASH was also convenient because it incorporates comprehensive user-friendly data- and solution-interrogation facilities. We provide an illustrative application in which MONASH results obtained under rational expectations for the effects of motor vehicle tariff cuts are compared with results obtained under static expectations.

Keywords: Research Methods/Statistical Methods; Agricultural and Food Policy (search for similar items in EconPapers)
Pages: 27
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Rational Expectations for Large Models: A Practical Algorithm and a Policy Application (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331106

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