Those who formulate economic policies must have some idea what their policies will do to the economy. However, as the economy becomes more sophisticated, it is not easy to evaluate all of the causal effects of a proposed policy. Even the best policy in a given situation may result in costs in some areas as well as the intended benefits. Such tradeoffs could not be obtained without the help of a model.
In Korea, a macro-model for active policy simulation gas not yet been developed. This rather simple semi-annual model is intended to serve as a substitute until a more disaggregated model is developed. Thus, this model was meant to be simple so as to be easily understood by policy-makers. Nevertheless, the model includes most of the essential variables which policy=makers may consider. The real GNP, inflation rate and the balance of payments are explicitly analyzed, although income distribution could not be incorporated in this simple aggregate model. This is a semi-annual model tailored to be highly practical : The seasonality problem can be handled with relative ease, and still a half a year seems to be sufficient to see the effects of most macro-economic policies.
- A Simulation Model of the Korean Economy
- Nam, Sang-Woo남상우
- Korea Development Institute