Home  Journals  Regional Economics: Theory and Practice  9(432) - 2016 September

Methods of evaluation of the impact of structural policy on macroeconomic parameters: General equilibrium models

Vol. 14, Iss. 9, SEPTEMBER 2016

Article PDF Version

Received: 7 April 2016

Received in revised form: 11 May 2016

Accepted: 8 June 2016

Available online: 19 September 2016

Subject Heading: THEORY OF REGIONAL ECONOMY

JEL Classification: C20, C30, D58, E27, O12

Pages: 98-112

Importance The article discusses the methods of assessing the relationship of structural policy and economic growth. It reflects the peculiarities of different methods and assesses the methods' ability to uncover the nature of the impact of structural reforms on macroeconomic performance indicators.
Objectives The article aims to reveal the methodological peculiarities of approaches to the assessment of the relationship of structural policy and economic growth, and assess the possibility of their practical application.
Methods For the study, we used a comparative analysis of research approaches.
Results The paper discloses the features, advantages and disadvantages of Computable General Equilibrium (CGE) and Dynamic Stochastic General Equilibrium (DSGE) models in terms of their application to evaluate the impact of structural change, the impact of structural policies on national measures.
Conclusions CGE models have significant advantages, like comprehensiveness, internal consistency, universality, but at the same time they have weaknesses arising from their neoclassical assumptions, the method of comparative statics used, and the inability to use empirically reliable elasticities, etc. DSGE models are the most advanced tools that can reflect the structural change affecting the various markets simultaneously. Their advantages are similar to the advantages of CGE models. In addition, they benefit from the inclusion of agents' expectations that protects this type of models from the Lucas critique. However, the microeconomic foundation this type of models based on do not guarantee the uniqueness and stability of the equilibrium, that leads to difficulties in modeling the system's response to structural changes.

Keywords: structural change, reform, economic development, econometric model, market equilibrium

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