Macroeconomic properties of the Norwegian applied general equilibrium model MSG6

MSG6 is an Applied General Equilibrium (AGE) model of the Norwegian economy developed at Statistics Norway. As its five predecessors the sixth generation of the MSG model is designed in order to calculate consistent long run projections of the Norwegian economy, as well as effects of changes in economic policy instruments and other exogenous variables. In particular, MSG6 has been designed in order to address issues such as the efficiency effects of changes in taxation, trade policy, various types of industry subsidies, environmental and energy policies. MSG6 has become considerably larger and, in several respects, much more complex than MSG5. Moreover, MSG6 should be regarded as a family of several different model versions rather than as one model. This paper is confined to the socalled "dynamic" version, which is characterised by perfect foresight of consumers and producers, as well as an intertemporal restriction on net foreign debt. Its purpose is to give an overview of the model structure, as well as to illustrate and explain the properties of MSG6 by interpreting the simulated effects of shifts in a relatively comprehensive set of exogenous variables. In the shift analyses, we focus on the macroeconomic properties of the model.

Acknowledgement: Thanks to Ådne Cappelen for useful comments on an earlier version of this paper.