Macroeconomic Modeling

A macroeconomic model is an analytical tool designed to describe the intertwined characteristics and operation of an economy or a region. In fact a macroeconomic modeling matrix organizes matrix representation of all transactions and transfers between different production activities, factors of production, and institutions (Households, Corporate Sector and Government) within the economy and with respect to the rest of the world. Such a model may be mathematical (Arrow-Debru) or computational [Applied General Equilibrium, AGE (Scarf, Shoven and Whalley) or Computable General Equilibrium, CGE (Taylor and Black, Chenery, and Robinson and others), Global Trade Analysis Project, GTAP (Hertel), and Dynamic Stochastic General Equilibrium, DSGE (Kydland and Prescott)] with every different type having different advantages and disadvantages and serving different purposes. This particular study will focus on CGE models for the economy of Bangladesh based on an expanded SAM. CGE models are a class of economic models that use actual economic data to estimate how an economy might react to changes in policy, technology or other external factors. However the existing SAM corresponds to the economic structure of 2006-07 and any CGE model based prediction and policy implication made on this existing SAM would fail to make up-to-date forecasting a possibility due to the many changes occurred in the production structure, factor endowment, technology and returns to factors of production since then. Thus to provide policy inputs on multifaceted issues of external and domestic shocks that would help policy makers to design informed policies that better serve the economy, the present study will construct an updated macroeconomic model.

Objectives and Scope of the Study

I. Produce an updated Bangladesh SAM embedded with an updated IO table.

II. Develop a computer program of the BIDS CGE model amenable to manipulation by in-house researchers as and when necessary.

Sources of Data: HIES, LFS, National Accounts, Government Budget Accounts, Trade Statistics and Balance of Payments.

Research Team

Dr. Mohammad Yunus (Team Leader)

Dr. Nazneen Ahmed

Dr. A K Enamul Haque 

Dr. M Salimullah & 

Rizwana Islam

Timeline of the Study

The study will be conducted between January and June, 2019.