Macroabc and Micromacrosim, November 2006
>> Macroabc methodology
>>Micromacrosim methodology
Summary:
In cooperation with local economists
Micromacro Consultants (MMC) has
built macro economic models in Indonesia, Kenya, Ethiopia, Poland,
Curaçao, Aruba and the Netherlands. These models are already intensively used for Outlook, Budget,
PRSP’s, Development Plans, Medium Term Framework’s
and
other policy analysis.
The success of the macro 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.
Complementary to Macroabc is available MicromacroSim that translates
the output of Macroabc (or macro assumptions) into the changes in
purchasing power of labour force divided in twenty seven groups and the
numbers below the poverty line. Shareware versions and
info: www.micromacroconsultants.com
In this note we discuss MMC’s combination of telework
approach
and Macroabc methodology including Micromacrosim. See also on this
homepage:
- Who is MMC abstract
- MMC Business profile
- MMC in Photo's
- Track record:description of main projects in Aruba, Kenya, Indonesia, Poland, Curaçao, Ethiopia etc.
- Introduction to Kenya macro model
- Macroabc-NL (in Dutch)
- Euralyse (Macroabc for 15EU countries)
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)
- MMC has many other files available. Actually
every country is different and needs its own model, geared to the data
and institutions of that country. Do not hesitate to ask mmc@bart.nl
for more information.
Macroabc model
methodology
MMC has developed macro models for many countries. It started with
macro models for Suriname and the Netherlands. Macroabc-NL is the Dutch
version of Macroabc and is as shareware on the Internet. This is a
practical macro-economic model of the Netherlands based on the core of
the large macro-economic models of the Dutch Central Planning Bureau, a
bureau with more than half a century practical experience in the use of
macro models. MacroabcNL may be used for analysis, historical
simulations, policy simulations, forecasting and monitoring of the
economy. The model on the Internet is in Dutch. Furthermore MMC made
'Euralyse', a model of the EU economy, with manual in
English. A
part of the Euralyse model (sum of 15 European countries) is also
available on this homepage, but not the whole Euralyse model.
Models based on MMC's Macroabc methodology are now available for The
Netherlands, EU 15, Curaçao, Suriname, Poland, Bonaire,
Kenya,
Indonesia and Ethiopia, while Aruba is forth coming. The Macroabc model
for Curaçao, called Curalyse, is also available on this
homepage. It is in Dutch as well as English as Papiamentu.
MMC’s
macro model projects give measurable results: You can download the
Curalyse model together with the documentation in sheet Manual. It runs
in Excel and with the Curalyse.xls file you can learn to run the model
by yourself. Not all Macroabc models are available as shareware. Some
are still confidential. However the Curalyse file models a small
islands economy and gives a good idea of a Macroabc model and how the
model is used in practice, now already eight years. To run this
Macroabc successfully, the only prerequisites are knowledge of macro
economics and some experience using spreadsheets on a personal
computer. However, without knowledge of macro economics, one can run
the model, push the button for recalculation and look at the output
table, but not understand what is going on. A macro model is only an
auxiliary and one needs to know how to live with the high inaccuracy
margins of macro economic forecasts. Actually, how to live with that is
an important part of the Macroabc projects. Technically the reference
manual shows the way: The sheet with reference manual explains the
equations that make up the model, illustrates how to use the model, and
even shows you how to adjust the model. Topics of the manuals include a
quick start; working with the model; a discussion of 42 variants;
behavioural relations; re‑estimation; discrepancy between model and
reality; adjusting the model and the model as an instrument for
monitoring, simulation, analysis, forecasting and scenarios.
These Macroabc models are shareware, not freeware. You can download it
from our homepage and use it for three months for evaluation purposes.
After that you will need a license for further use.
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 three years for the post
graduate training in applied economic 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
Euralyse model as 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 proces, 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 Internet in between the visits, and preparation of
modelimprovements and training material and prepaation of the visits.
- Support of specialists in model
construction and practical 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 specialised in the
subject.
MMC's specialised expert pool makes it the ideal partner for applied
quantitative analysis and economic modelling 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 analysing 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, Kenya, Indonesia, Ethiopia, Aruba
and
the Netherlands shows again that the formula works.
MicromacroSim:
Micro (poverty) analysis
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:
The abstract gives a short
overview of the methodology.
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. It is possible to download the manual here.
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.
In April 2003 MMC made an update of the initial demonstration version.
This version can be downloaded here.
This version contains an update of income distribution data and a more
detailed output table.
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.
MicromacroSimDemo is a demonstration version of the methodology that is
available as shareware on www.micromacroconsultants.com.
For this version statistical data for Kenya were used as an example.
The goal of this demonstration version is to give you an idea of the
strengths and possibilities of the MicromacroSim methodology. 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 28 groups in the Kenyan society,
defined on the bases of income and sector
- 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
- Graphs that show the development of
purchasing power for the different groups within society
- Numbers below the poverty line for the
next five years
The methodology of Macroabc and MicromacroSim provides an instrument to
analyze and forecast the effects of macro and tax policy changes.
However, the effects of direct measures to decrease poverty, like for
example micro credits and food transfers, are not (yet) included.
The demonstration version of MicromacroSim is available as download on www.micromacroconsultants.com. Here
you can also find a manual with a detailed description of this program
and an analysis of various variants that were run with this program.
Furthermore there are two slideshows available that explain
MicromacroSim. In the first a quick overview of the program is given
whereas the second demonstrates the running of a variant.
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