SMEC - Modelbeskrivelse og modelegenskaber, 2006

Abstract:
 

The paper describes the main characteristics of the SMEC model.SMEC – Simulation Model of the Economic Council – is a macroeconometricmodel describing the Danish economy. The model is used by the Danish EconomicCouncil when conducting forecasts and policy analyses.The paper contains an overview of the model and describes the fundamentalproperties of SMEC.

SMEC is an annual model that contains some 600 equations. The model isbased on national accounts data. Most estimations is based on data from1966-2005. There are 8 production sectors and 5 types of imports. Demand isdivided into 6 types of private consumption, public consumption, 3 types ofinvestments and 5 types of exports. A structural input-output system linksdemand and supply and prices. Stocks and flows are modelled consistentlyassuring that savings accumulates into financial wealth and investments intoreal capital. The model treats interest rates, the exchange rate, the labourforce, tax rates, public consumption, total factor productivity, foreign demandfor exports, and import prices as exogenous.

In the short run the model is Keynesian in the sense that production is determinedby demand and that wages are taken as given. However, wages react tochanges in unemployment, and in the long run production is determined bysupply-side factors such as the labour force, the capital stock and technology.This means, that SMEC features full crowding-out in response to shocks tothe demand side.