Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/50813
Authors: 
Hartwig, Jochen
Year of Publication: 
2004
Series/Report no.: 
Arbeitspapiere // Konjunkturforschungsstelle, Eidgenössische Technische Hochschule Zürich 90
Abstract: 
Macroeconometric policy simulation models allow for an analysis, and, above all, for a quantification of the effects different economic policies have on the various variables that represent the economy. Despite the seminal Lucas critique levelled against them, these models are still widely used, especially within policy-making institutions such as, e.g., central banks. In this paper, a model constructed by the author for the Swiss economy is used to explain, and to quantify the impact of fiscal, monetary, wage and social policies on the functional and personal distribution of income on the one hand, and on the four main objectives of contemporary economic policy on the other. These are: a high GDP growth, low inflation and unemployment, and a low or zero public deficit (the latter replacing the original fourth objective codified, e.g., in the German Stability Act of 1967, which was external balance). Our approach will enable us to answer questions like: Which income group suffers most from a hike in the short term interest rate?, Should a large public spending project better be financed by increasing the VAT rate or the income tax rate?, and How much could the aggregate social security contribution rate be lowered if the formula used for calculating the alignment of retirement pensions was changed?
Subjects: 
Income distribution
magic square
macroeconometric model
policy simulation
Switzerland
JEL: 
C51
C53
E17
E52
E61
E62
E63
E64
E65
Document Type: 
Working Paper

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