scholarly journals Economic Growth and Endogenous Fiscal Policy: In Search of a Data Consistent General Equilibrium Model

2000 ◽  
Author(s):  
Jim Malley ◽  
Apostolis Philippopoulos
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
General Equilibrium Model

scholarly journals When the Treasury and its Models Seize Power

2016 ◽  
Vol 11 (1) ◽  
Author(s):  
Jesper Jespersen
Keyword(s):  
Fiscal Policy ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
Structural Model ◽  
General Equilibrium Model ◽  
Social Constructs ◽  
Model Set ◽  
Institutional Status ◽  
Empirical Tests ◽  
Set Up

This paper explains how short- and medium-term macroeconomic projections are undertaken within the Danish Ministry of Finance (DMF) by the use of an annual macroeconometric model, ADAM, together with a theoretical, structural general equilibrium model, DREAM. DREAM is used to calculate the structural public sector budget deficit, which by law is required never to exceed ½ percent of GDP. This legal restriction on fiscal policy gives the structural model (and the ‘model-operators’) a hitherto unseen political power. This ‘institutional’ status of DREAM causes a number of questions about democracy to be asked. First, why has an elected government accepted to surrender its legal right to undertake an active fiscal policy? Secondly, how can it be that DREAM – a neoliberal general equilibrium model without proper empirical tests and operated by anonymous civil servants – has been elevated to a position akin to a high court’s? The paper demonstrates how this model set-up within the DMF reproduces reality poorly. Therefore, these models should rather be seen as social constructs predetermined be neoclassical/neoliberal economic theory, which has to be acknowledged as a democratic challenge.

scholarly journals Phased-In Tax Cuts and Economic Activity

2006 ◽  
Vol 96 (5) ◽  
pp. 1835-1849 ◽  
Author(s):  
Christopher L House ◽  
Matthew D Shapiro
Keyword(s):  
Economic Growth ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
Economic Activity ◽  
Dynamic General Equilibrium ◽  
General Equilibrium Model ◽  
Slow Recovery ◽  
Tax Rate ◽  
Dynamic General Equilibrium Model ◽  
Aggregate Effects

This paper uses a dynamic general equilibrium model to analyze and quantify the aggregate effects of the timing of tax rate changes enacted in 2001 (which called for successive rate reductions through 2006) and 2003 (which made immediate tax rate cuts scheduled for 2004 and 2006). The phased-in nature contributed to the slow recovery from the 2001 recession, while the elimination of the phase-in helped explain the increase in economic activity in 2003. The simulations suggest while the tax policy was a drag on the economy in 2001 and 2002, it increased economic growth in 2003, once phase-ins were eliminated.

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