Capros P., P. Karadeloglou and G.N. Mentzas (1989) "Neo-Keynesian and Applied General Equilibrium Models: New Developments for Greece"
Paper presented at the IFAC Symposium "Modelling and Control of National Economies", 27-29 June, Edinburgh, England.
In this paper we provide a systematic presentation of the design construction and testing process for a family of models of the Greek economy: the GEM/NTUA family of models. These models follow the major but distinct approaches that have emerged in applied macroeconomic modelling the general equilibrium and the neo-Keynesian streams. We design and econometrically estimate two annual macroeconomic models: a multi-sector neo-Keynesian model (GEM-NK) and an applied general equilibrium one-sector model (GME-ACE). After presenting their respective simulation properties, we proceed to a comparative assessment of the two modelling approaches. The comparison is carried out by using an one-sector neo-Keynesian model (GEM-NK-1) which is representative of the multi-sector neo-Keynesian model. The two models, namely the GEM-NK-1 and the GEM-ACE models, share most of the equations and have the same estimated behavioural elasticities. We carry out a systematic comparison of their properties by applying several common shocks to the exogenous variables. Recommendations for a synthesis of their results and a policy-oriented combined use of the models are proposed. Finally, the modelling aspects of the paper may be useful to analysts, since it provides a method for easy transformation of an existing neo-Keynesian model into a general equilibrium model.
Paper available on request (hard copy only).
