SMEC - Modelbeskrivelse og -egenskaber

Abstract:

The paper describes the main characteristics of the SMEC model. SMEC - Simulation Model of the Economic Council - is a macroeconometric model describing the Danish economy. The model is used by the Danish Economic Council when conducting forecasts and policy analyses. The model has just undergone a major restructuring which is described in the present paper and in two other working papers by the Secretariat of the Danish Economic Council.

The most important changes that have been made relate to the introduction of a structural input-output system, a new aggregation of the production sectors making SMEC more disaggregated, new relations describing demand for capital and labour, and finally price determination. The paper contains a short description of some of the most important behavioural equations and gives an overview of the fundamental properties of SMEC. The demand side as well as the supply side are important in the model. In the short run the features are Keynesian in the sense that production is driven by demand and wages are taken as given. However, also the supply side plays an important role in SMEC, and the long run properties are a supply driven model with the labour force and technology as the binding constraints. Thus, the model features full crowding-out in response to at shock to the demand side. E.g. the effects on total employment of a permanent (unfinanced) increase i public spending is zero after 10-12 years. In the paper, the properties of the model are illustrated with a number of multiplier experiment.