Macroabc and Micromacrosim
>> Macroabc methodology
>>Micromacrosim methodology
Summary:
In collaboration
with local economists Micromacro Consultants (MMC) has built macroabc economic
models and poverty modules in Curaçao, Aruba, Netherlands, Suriname, Indonesia,
Bhutan, Kenya, Zambia, Rwanda, Country X, and some ten other countries.
Use
of the model:
The model can be used for:
a)
Training and research how the
economy of the country, with special
attention to poverty reduction
b)
Fiscal and socio-economic
policy simulations of scenarios (what if/ impact analysis).
c)
Regularly updates, new baseline
and scenarios with new output tables for Budget paper, medium term poverty
reduction paper, long term Vision paper, tables to prepare IMF visits.
d)
And macroabc even be helpful
the production of tables for those reports.
Please note that most macroabc models do have a
complementary poverty module that translates macro economic developments
combined with data from Household Surveys into change in share of the
households below the poverty line
In most
countries the model has been used as a tool for training in better
understanding how the economy works, in some countries also for what if policy
simulations, and in some countries for some time also to produce Outlook etc.
Because of labour mobility in case there is no maintenance and training of new
staff, the models become sometimes ‘’sleeping’’ till a new team makes a fresh
start.
What kind
of framework or model is Macroabc?
Macroabc is a structural macroeconomic model. You can see it as a
streamlined version of the macro models as are already starting in 1947 in use at CPB
Netherlands. Or you can see it as a Financial Programming framework, but with
three additional things compared to FP frameworks:
a) Explicitly statistical discrepancies
in case of a variable that has different values in different sectoral tables.
Definition relations for (sub) totals and deficit variables,
b) A household sector with
employment data from Household Surveys, and a complementary poverty module,
c) Behavioral equations that include the role of incentives (cost price,
productivity).
Because of that it is more then a framework,
it is a model that also can be used for what if simulations and scenarios.
Macroabc has many sheets, but most are output sheets. The most important
sheet is just one: sheet Model. It uses data from Source and Assumptions sheet
and results are used in several output sheets.
The conceptual structure is quite clear: the
model is organized in sectors: Real, External, Fiscal, Monetary and Households.
Each sector revenues, expenditures and residual. Because all sectors are
linked, if you change one variable in one sector, all variables, also in other
sectors, can change.
For those who are familiar with Financial Programming, need to know that
Macroabc is full of definition relations and behavioral equations. Each
macroabc model has a Manual with full
documentation.
The model is simultaneous, but can nevertheless run in Excel (set
circularity allowed on).
The model are home-grown in most countries,
because after construction of a demo version by the consultants, it was made
step by step through the hands of the local the participants in workshops in
the country and in Netherlands.
The model can also produces estimates of GDP
to sectors of industry by using a CPS matrix, see sheet Sectorsabc.
The model requires assumptions as input, like
exports, agricultural productivity, oil price, fiscal policy measures (effect
in mln. Of local currency to economic classification of revenues and expenditures),
population growth.
The main behavioral equations are discussed
in sheet Manual. Please note that the model is not only demand driven. The
supply side is very important and is there through the competitiveness in the
export equation. So the mean driving factor for economic growth is decrease of
cost prices thanks to increase of productivity and decrease of taxes.
However,
The macroabc model is an auxiliary for better understanding of the
links in and between sectors of the economy. But please notice that Economic
science is not developed so far that we know exactly how the economy works, so
the data are simply estimates. There is no model in the world to proof exactly
how policy measures will, via several channels, affect GDP, BOP, Fiscal sector
and poverty. But one can try to construct a macroabc model and poverty module
that reflect the economy of a specific country as good as possible to get an
idea of how the policies would affect fiscal, economic and poverty targets.
Model
training projects
The success
of the macroabc model projects results from the combination of the telework
approach, involvement of local economists and the Macroabc methodology,
originally developed in the Netherlands and then enriched with the experience
of economists in South America and Caribbean, Europe, Africa and Asia.
You can also download as shareware the models:
- Curalyse
(Macroabc model for Curaçao partly in English and Dutch)
- Antillyse
(Macroabc model for Netherlands Antilles
partly in English and Dutch)
- Macroabc-NL
(in Dutch)
- Macroabc-Macedonia
(testversion for demonstration purposes)
- MicromacroSimDemo
(test version applied to Kenya)
- Antiltax(Micromacrosim
applied to Curaçao partly in English and Dutch)
- Macroabc_UN_Country
X
- Macroabc_Bhutan
(demo version)
As an introduction we recommend to go into Macroabc_UN_Country X, go
trough the sheets and study sheet Manual.
Macroabc model for new country?
Actually, just using macro data from Art.IV mission report of IMF
and the data from Households Surveys as promoted by WB, MMC can produce within
3 month a running demo macroabc model for each country in the world that has
complete National Accounts in running and constant prices on Internet. We did
that already for Bhutan
and Grenada.
(In the last case together with my partner in Curaçao you can download Grenada
macroabc on www.calmera.nl).
And in collaboration with KIPPRA Kenya we do that now for Mozambique.
The Macroabc models
are kept as simple as possible in order to make them easy to handle. But not
that simple: all relationships are included that are relevant for the country
involved and the main user. That means that for example Macroabc models
developed for a Ministry of Finance will have a lot of detail concerning the
government sector in the model. Actually, Macroabc models for different
countries differ a lot, so the name Macroabc changed from the name of a
model to the name of
a methodology how to construct macro models
Telework Approach and
Macroabc Methodology of MMC.
Macroabc started as
the name of a model for the Netherlands,
and other countries, but even more it became a method how to construct models
in co-operation with counterparts.
MMC developed its own efficient mix of co‑operation and
training. It tries to reduce the psychological and intellectual distance one so
often sees between a consultant and his counterpart. In this mix, the three
spearheads of MMC's methodology each have their proper place:
- Practical
training in macro-economic modelling for policy analysis of market
economies.
MMC offers tailor-made programs of one to four years for the post
graduate training in applied macroeconomic analysis and policy. Theory and
discussions in workshops are supplemented by practical exercises. Actually the
main activity of the project is to (re)build a macro economic model of the
country in co-operation between counterparts, short term MMC consultants and
sometimes also local or regional consultants. During this exercise it will
apparently becomes clear which elements of macro model building and use of such
model in practice of policy preparation (base line for the budget and policy
variants) are not yet understood in practice and MMC consultants provides
knowledge and practical training for those elements. These exercises are built
around a compact and understandable model of the economy which was specifically
designed for training purposes.
We start to build as soon as possible a preliminary version of the
Macroabc model of the country, using another Macroabc model, for example the Macroabc_UN_X.xls
an example. We feed that with data and preliminary coefficients, also using
information from already available macro economic studies of the countries
involved. That helps us to communicate what kind of macro model is needed and
is feasible.
Then we restart the model building process again from the beginning together
with the local economists. So the preliminary version of the model will be
elaborated and enlarged in order to highlight a particular issue of concern to
the counterpart. Moreover, the model building process is designed so that the
counterpart can be an active participant in the process, either by seeing the
adjustments being made during the discussions, or by performing them himself.
In this way his interest and involvement in the project is assured, and the
alienation that so often marks the activity of outsiders in Technical
Assistance projects is avoided. Stand-by service by e-mail throughout the
project and a clear and understandable documentation is a standard part of
MMC's service. Very important is our telework approach: we combine:
- Short
visits of MMC consultants to the country
- Short
visits of counterparts to the Netherlands with every morning
a workshop of another specialist (much cheaper and more effective than
bringing all the time so many experts to the country involved)
- Communication
via email and Skype in between the visits, and preparation of model improvements
and training material and preparation of the visits.
- Support
of specialists in model construction and quantitative economic analysis.
During the process of constructing a macro model of the country all
the time special challenges arise: each country has its own peculiarities so
the prototype of the Macroabc model needs to be adapted. This needs special
analysis and research, to be executed by the counterparts with support of
MMC consultants that are specialized in the subject. MMC's experts pool makes
it the ideal partner for applied quantitative analysis and economic modeling
studies. The methodology of MMC successfully avoids the trap of splendid
isolation and working in a vacuum, in which many research projects get
entangled. Instead, it actively fosters the dialogue between researcher and
counterpart. Moreover an important part of the work will be done by the
counterparts itself. This is the only way that they really learn to master the
model. The success during already eight years shows that MMC's methodology
works.
- A flexible
prototype model: Macroabc.
In each new Macroabc
project we use one or more already existing Macroabc models as a
prototype. MMC also has designed special training materials like study modules
as a central element of the special methodology of MMC. Counterparts that
master their Macroabc model may be use it for analyzing the effect of
macro-economic policy, for historical simulations, for short and medium term
forecasting as base lines for Government Budget, Poverty Reduction Strategy
Paper, Development Plan, Outlook and for the construction of long term scenarios.
The Macroabc models have a clear basic structure, and also enough flexibility
to be adjusted to suit the issues to be addressed. Prerequisites for
handling the model are knowledge of macro Economics and statistics and
familiarity with spreadsheet software on the PC. The availability of some
Macroabc models as shareware on the internet enables interested parties to see
its powerful performance. It is part of MMC's open‑minded policy to supply
interested internet users with the necessary information to assess the model's
performance for themselves. The success of the projects in Suriname, Curaçao,
Poland, Indonesia, Ethiopia, Aruba, Netherlands, Kenya and Zambia and other countries shows again that the
formula works.
MicromacroSim:
poverty module
MMC and its pool of
short term consultants has not only expertise in macro economics, but is also
specialized in the use of micro data bases for gross and net income
analysis and the simulation of number of people below the poverty line. For
example MMC developed the Microtax model of CPB of the Netherlands
further into the MicromacroSim module, it has constructed a wage bill and net
income simulation model for the Ministry of Education of the Netherlands,
and used big micro databases to analyze the wage drift in several sectors. The
macro and micro knowledge of MMC could be also very interesting to contribute
in the construction and monitoring of Poverty Reduction Strategy Papers. MMC
could especially contribute to bridge the gap between macro economic growth
& micro poverty analysis and monitoring by construction of a combined macro
and micro model, starting with a combination of a Macroabc model and
MicromacroSim module.
There are a number of ways in which you can get
acquainted with MicromacroSim:
MMC did build a demonstration version of MicromacroSim.
In this version a MicromacroSim model is made that uses Kenyan statistical
data. It is a preliminary version that has as a goal to give an idea of the
possibilities with MicromacroSim.
In the Manual a detailed description of the methodology
and the demonstration version can be found. This Manual also contains the
description of some variants. Being able to analyze the effects of variants on
poverty and purchasing power is one of the strengths of MicromacroSim.
In order to give you a visual impression of MicromacroSim
MMC put two slide shows on the internet.
The first gives
a short introduction to the different sheets in the demonstration version.
The second
explains how a variant can be run with the demonstration version.
MicromacroSimulator Abstract
In the light of the global interest in the reduction of poverty and
the accompanying need for an instrument to measure the effects of
macro-economic policy on poverty MMC developed the MicromacroSim methodology.
This methodology is an auxiliary in the translation of macroeconomic forecasts
and simulations into microeconomic information about the number of people below
the poverty line and the purchasing power of different groups in society. This
allows the user to analyze the effect of macroeconomic developments and policy
on the poverty level. The optional inclusion of information of the tax system
would make it possible to assess how a changing macro-economic environment or
policy changes will influence the tax revenue. This can help in the
construction of budget-neutral (without a loss or gain in tax revenue)
policies.
MicromacroSim is most powerful if it is used as a module
to a Macroabc model. In this case the program uses the consistent forecasts of
the Macroabc models in its analyses of poverty and purchasing power in future
years. Just like most Macroabc models MicromacroSim runs in Excel and is
therefore easy to work with. The running of variant analyses can therefore be
done by everyone with a little knowledge of Excel. This is interesting because
one of the strengths of MicromacroSim lies in its usefulness in simulation
analysis. A large number of simulations are possible with this program, it can
be used to assess the effects on poverty, purchasing power and tax revenue of:
- Changes
in the inflation rate
- Changes
in the income growth in different sectors (private, government, informal
and traditional)
- Changes
in the employment rate in those sectors
- Tax
reforms (indirect tax, income tax)
- Adjustment
of the poverty line
- A
combination of any of the above
Next to this the program can be used for a historical review of
purchasing power and poverty.
The charm of MicromacroSim is that it can be used for a
broad range of political and economic analysis. Therefore the program can be
applied to meet the needs of many different countries. Up till now the
MicromacroSim has been adapted to function for different purposes in the
following models:
- The
tax-model for Curacao called Antiltax
(downloadable on www.micromacroconsultants.com),
- The
Suritax model for Suriname
(including a poverty module),
- A program
that MMC built for the ministry of Education, Science and Culture of the Netherlands,
- A
calculation sheet used for a research in the Dutch health sector,
- The
Bontax model for Bonaire and
- MicromacroSimDemo,
this program has been developed by Drs. Bas van Tuijl and Dr. Marein van
Schaaijk in 2002.
- Poverty
modules in the following Macroabc models for: Kenya, Indonesia,
Zambia,
Rwanda,
Country X, Bhutan
See in the sheets
Manual in the shareware versions for Country_X or Bhutan on this homepage.
The general structure
of this program is summarized in the following section:
INPUT:
From Macroabc model or statistics for the past and
assumptions for the future
Data on gross income levels and the level of the labor
force for
- Employees
private sector
- Employees
government sector
- The
informal sector
- The
traditional sector
- Consumer
prices
And on a
micro-economic level
- A recent
income distribution within the sectors
- Information
about the tax system, rates and brackets
- If
relevant, information about the social security system
CALCULATIONS:
- Calculation
of the gross net-real income for each of the five categories, and
within each categorie 5 or 7 income classes.
- Calculation
of numbers below the poverty line in different years
- Calculation
of total income and total tax revenue
OUTPUT:
- Real net
income growth for the average income earner in the private, government,
informal and traditional sector
- Numbers
below the poverty line
The methodology of
Macroabc and MicromacroSim provides an instrument to analyze and forecast the
effects of macro and tax policy changes.
|
