Forecasts for the Australian economy using the MONASH model

This paper describes annual forecasts for the period 1990-91 to 1996-97 made with a new CGE model of the Australian economy called MONASH. Using MONASH, the authors project the implications for the structure of the economy of macroeconomic forecasts made by conventional, less formal methods. MONASH has enough dynamics to enable it to track, at the micro level, business-cycle phenomena which are assumed in the macro forecasts. The CGE model is very detailed, distinguishing 112 industries, 6 regions and up to 283 labour-force occupations. Apart from the level of detail, the strength of the present MONASH forecasting system is that it produces forecasts which can be interpreted fully in terms of the model’s theory, data and the assumptions underlying the exogeneous input.