Long run concepts in New Zealand macroeconometric and CGE models

Abstract

This paper evaluates how published economy-wide New Zealand models have treated concepts relevant to the long run. These concepts, a number of which have only indirect linkages to the long run, include steady state growth, rational expectations, unit roots and cointegration, domestic and external debt sustainability (including intertemporal fiscal and foreign sector constraints), explicit supply (including physical capital accumulation), the interfacing of macroeconometric and computable general equilibrium (CGE) models, and the interfacing of New Zealand and Australian CGE models. It builds on the comprehensive medium term oriented assessment of Wells and Easton (1983, 1986), and focuses primarily on RBNZ Model XII (Brooks and McDermott, 1990, Brooks and Gibbs, 1991), and the CGE models JOANNA, JULIANNE and JOANI (Philpott, 1989).