Building Blocks in Modeling a Market Economy: The Dobrescu Macromodel of Romania

Bianca Pauna and Corina Saman (Editors)
Centre for Macroeconomic Modelling, National Institute for Economic Research (NIER), Romanian Academy, Romania

Series: Economic Issues, Problems and Perspectives
BISAC: BUS069030

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In most countries there is a growing demand for forecasting tools, and Romania is no exception. The main forecasting tool used by the Romanian decision makers in order to construct prognosis for the economy or in order to analyze the effect of different policies is the 2005 Dobrescu Model. Although the Dobrescu macro-model has proved its usefulness, factors have pointed toward the need to update it.

This book presents an up-dated version of the Dobrescu Model of the Romanian economy, structured as independent blocks. The model consists of 6 blocks. In the main block, the main macroeconomic indicators are forecasted: the GDP and its components (with the exception of the budget expenses which are computed in the budget block), the labor market indicators (participation rate and unemployment rate), labor income, foreign trade and prices and the exchange rate.

The General Consolidated Budget block links the budget variables to other macroeconomic indicators from the main block, thus enabling an analysis of the implications that different policies might have on the budget. The budget revenues are connected directly to the legal rates, thus making possible the observation effect of tax changes. The approach permits the separation of the factors related to the macroeconomic environment and the factors related to fiscal policies.

The Monetary and Balance of Payments block is structured in two sub-blocks: the banking sector and external sector. The banking sector includes commercial banks and the central bank, and generates estimates for demand of money, dynamics of the non-governmental credit, active and passive interest rates. The external sector details variables related to the balance of payments like current account balance, foreign direct investment, net portfolio investment, total debt, medium and long-term debt, etc..

The Primary Energy Balance block aims to capture the effect of structural changes at the level of the economy’s sector and household sector on the demand for energy. The block has behavioral equations for the households demand for energy, productive sectors’ demand for energy and energy losses, which together made up the demand for energy. In this version of the model the production of energy together with energy imports are exogenous. In order to analyze the sustainability of the economic development an estimate of the green gases emissions is obtained as well.

The Sectoral Structure of the Economy block models the sectoral dynamics of the defined 10 branches of Romania’s economy with the help of Input-Output tables. It uses inputs from the main block in the form of gross domestic product, gross fixed capital formation, exports, imports, etc., and the aggregate variable is decomposed into the 10 sectoral components.

The long term forecast block was introduced in order to quantify the long term effects of a different possible development path. The block is constructed using specific theories in order to provide long term forecasts of 10 to 15 years. (Imprint: Nova)

Preface

Introduction: Modeling the Romanian Emergent Economy
(Emilian Dobrescu)

Chapter 1. Main Block
(Bianca Pauna, Corina Saman and Dorin Jula, Centre for Macroeconomic Modelling, National Institute for Economic Research (NIER), Romanian Academy, and others)

Chapter 2. General Consolidated Budget
(Cristian Nicolae Stanica, Institute for Economic Forecasting, Romanian Academy)

Chapter 3. Monetary Sector and the Balance of Payments
(Bogdan Murarasu, DOFIN, Department of Money and Banking, Bucharest University of Economic Studies, Bucharest, Romania)

Chapter 4. Primary Energy Balance
(Raluca Ioana Iorgulescu and Andrei Silviu Dospinescu, Institute for Economic Forecasting, Romanian Academy, and others)

Chapter 5. Sectoral Structure of the Economy
(Viorel Gaftea, Center for Macroeconomic Modelling, NIER, Romanian Academy, Buchaest, Romania)

Chapter 6. Long-Term Forecast
(Florin-Marius Pavelescu, Institute of National Economy of Romanian Academy, Bucharest, Romania)

Index

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