Économie et Statistique n° 451-452-453 - 2012Macroeconomic modeling : continuity, tensions
Macroeconometric versus DSGE Models in Economic-Policy Assessment: A Comparison Based on the Mésange and Égée Models
The main difference between these models is households consumption behaviour. Mésange is a Keynesian macroeconometric model that rests on a Keynesian-inspired function, in which consumption is highly sensitive to current household income. Égée is a dynamic general equilibrium model in which most households, described as Ricardian, optimize their decisions intertemporally. Their consumption is highly sensitive to their expectations about the future course of the economy and is therefore weakly determined by their current income. If all households were Ricardian, Égée would not contain a Keynesian multiplier. The long-term theoretical structures in both models are very similar, as are the qualitative effects that they attribute to fiscal policies. Wage equations have very different theoretical bases. In Mésange, the equations are the outcome of bargaining between social partners. In Égée, they are determined by labour supply. Despite this, the equations have similar analytical forms, but the employment elasticity of wages is much lower in Mésange, resulting in greater fiscal-policy effects. With a few exceptions, the short- and long-term effects of fiscal policies differ significantly between Mésange and Égée. In both models, the effects are highly sensitive to the real and nominal rigidities introduced and to the values of the parameters that determine the relative strengths of these rigidities. In Mésange, the rigidities are largely ad-hoc and merely introduce error-correction adjustments into equilibrium equations whose theoretical status is clear. In Égée, they are rooted in theoretically firmer ground, although their list and detailed specification rest on foundations that may sometimes seem weak. A notable difference between the two models is their pace of convergence towards long-term equilibrium, which is much slower in Mésange.