2. 2/13/20141 Jean-Marc PHILIP Université de la Méditerrannée France Email (jean-marc.philip@univmed.fr) Presentation in Skopje March 2010

3. " Everything should be made as simple as possible, but not simpler." Albert Einstein « Une œuvre où il y a des théories est comme un objet sur lequel on laisse la marque du prix.» Marcel Proust. (A work with theories is like an objet upon which brand price is left) « For all interesting questions in economics, the only good answer is: it depends. » Thomas Rutherford 2/13/20142

4. Data availability issue for building an energy-economic framework ; Framework of a Social Accounting Matrix elaboration following the business intelligence (BI) approach; Building the Social Accounting Matrix for Macedonia (2000 and 2004); Building a Calculable General Equilibrium Model equations for a green growth policy in GAMS-MPSGE. 2/13/20143

5. More and more data available, today data availability is less an issue data management and analysis becomes a problem. Easier data collection thanks to improved technologies and standardised data collection methodologies (web, email, etc.) Production of synthetized reports of aggregated data (input-output tables, make and use tables, expenditures and resources, national accounts, consolidated budget, balance of payments, etc.) How can data originating from heterogeneous environments be collected, aggregated and analyzed ? Can political deciders easily understand quantitative information provided ? 2/13/20144

6. SAM represents transfers in values between institutional agents and sectors; A SAM is a comprehensive, disaggregated, consistent data base that captures the interdependence that exist within a socio-economic system; The SAM is a coherence tool (e.g. in the SAM the data are organised and viewed in a global and consistent way). Hence : The SAM is a decision tool by itself and may be seen as the most important dashboard for the government. SAM should be updated yearly in order to analyse transfers evolution between agents 2/13/20145

7. Factor and product markets equilibrium (supply = demand) Budget constraints: for each agent: total income = total expenditure Macroeconomic Balance: Saving = Investment Assets = Liabilities. SAM is generally built by institution (consultant) elaborating the CGE model. Data are collected essentially from : - the main macro-economic and financial indicators - the Supply and Use tables (transformation from accounting view to economic view) - the input-Output tables for the different sectors SAM should be built by all concerned institutions (MOF, Central Bank, Ministry of Economy, …) and compiled by the National (or regional) institute of Statistics. The main issue for building a SAM is data extraction, transformation and aggregation (top-down vs bottom-up approach) 2/13/20146

8. ETL is a class of program that manages the transactions to be done between the original tables and the Data Warehouse The Data Warehouse is updated thanks to the ETL process BI tools (such as SSIS, SSAS, SSRS included into SQL 2010) can be used, GAMS is also a good – and free – ETL package. 2/13/20147

9. Following the BI approach, the SAM for Macedonia was built in 2007 according to the BI approach (data preparation and ETL) Data preparation is generally done using the pivot table Excel feature (it is not always necessary). The SAM directly reads its input data from the Input-Table 2000 (available in Excel Matrix format); Extraction-Transformation and Loading (ETL) was done in GAMS. 2/13/20148

10. A standard CGE model asserts that in a free market, production and demand of goods depend on the market price; CGE models were initially used by the World Bank for fiscal analysis; Presently CGE models are widely used for trade analysis (impact of trade agreements, EPA, trade liberalisation, WTO accession, etc.) and energy policies (e.g. energy or carbon taxation). 2/13/20149

11. More generally, CGE models are more and more used for building « what if » scenarios. CGE models may also be used for economic forecasting (as they can produce a consistent macro-economic framework for the country) CGE modeling captures a large panel of economic policies and a basic structure can be adapted for different purposes. 2/13/201410

12. MPSGE is a language/syntax invented by Thomas Rutherford which enables to build CGE models without writing equations MPSGE model is based on the MCP (Mixed Complementary Problem) approach of the Arrow- Debreu general equilibrium model prices are calculated from equilibrium between supply and demand (zero stocks) quantities are calculated from equilibrium between input and output prices (zero profits) From a standard version the structure a MPSGE CGE model can be easily adapted to better capture economic behavior of a specific country (e.g. CES functions, price flexibility, taxes etc.) MPSGE is available in GAMS. 2/13/201411

13. A dynamic Calculable General Equilibrium (CGE) sectoral model in GAMS/MPSGE with: 3 production factors (labor, capital and energy) 6 sectors with energy and non-energy branches Two markets for factors of production : imports and domestic (different prices) Various economic agents (households, government, rest of the world) 6 products : same as sectors (possibility to distinguish sectors and products up to Input- Output table disaggregation). 2/13/201412

14. : ETL process to build the SAM from Input- Output tables and additional tables using GAMS programming; CGE model built in GAMS/MPSGE (robustness, easy handling, no algebraic equations); Elaboration of what if scenarios within GAMS Energy policy simulations can be done through the GAMS IDE interface (GAMS can be also launched from Excel or user interface); Model results are sent into Excel file, Access or many other DBMS; Results can be viewed from Excel or any other spreadsheet (such as QlickView) 2/13/201413

15. 2/13/201414

16. $MODEL:RECURSIF $SECTORS: Y(i,t) ! Output IT(t) ! Investment CTH(t) ! Household consumption CTG(t) ! Government consumption E(ae,i,t)$E0(ae,i) ! Exports by product and by area M(ae,i,t)$M0(ae,i) ! Imports by product and by area Q(i,t) ! Composite goods MT(i,t)$SUM(ae,M0(ae,i)) ! Imports by product ET(i,t)$SUM(ae,E0(ae,i)) ! Exports by product $COMMODITIES: RK(t) ! Return on capital PK(t) ! Price of Capital PL(i,t) ! Wages Rates PN(t) ! Price of energy PC(t) ! Index of consumer prices PG(t) ! Price index for government PM(ae,i,t)$M0(ae,i) ! Price index of imports by area PD(i,t) ! Price index for domestic goods PE(ae,i,t)$E0(ae,i) ! Price index of exports by area 2/13/201415

17. PMT(i,t)$SUM(ae,M0(ae,i))! Index of import prices PET(i,t)$SUM(ae,E0(ae,i))! Export price index PQ(i,t) ! Price index for composite goods PFX(t) ! Index of real exchange rate $CONSUMERS: HOU(t) ! Private Sector GOV(t) ! Government ROW(t) ! Rest of world $AUXILIARY: K(t) ! Capital Stock DTax(ac,t) ! Direct taxes MK(i,t) ! Rigidity constraint on the composite price PLF(i,t) ! Rigidity constraint on wages BOP(t) ! Rigidity constraint on the exchange rate TRF(t) ! Constraint on transfers from ROW $PROD:Y(j,t) va:SigmaF(j) t:SigmatZ(j) O:PET(j,t) Q:(SUM(ae,E0(ae,j))) O:PD(j,t) Q:D0(j) I:PL(j,t) Q:F0("lab",j) VA: I:RK(t) Q:F0("cap",j) VA: I:PN(t) Q:F0("ene",j) t:taun(j) a:GOV(t) I:PQ(i,t) Q:CIJ0(i,j) 2/13/201416

18. $PROD:IT(t) s: sigmaIT O:PK(t) Q:IT0 I:PQ(i,t) Q:Inv0(i) $PROD:CTH(t) s: sigmaH O:PC(t) Q:(SUM(i,C0('Hou',i)-C0_('Hou',i))) I:PQ(i,t) Q:(C0('Hou',i)-C0_('Hou',i)) $PROD:CTG(t) O:PG(t) Q:(SUM(i,C0('Gov',i))) I:PQ(i,t) Q:(C0('Gov',i)) $PROD:ET(i,t)$ET0(i) t:sigmaET(i) O:PE(ae,i,t) Q:E0(ae,i) I:PET(i,t) Q:(SUM(ae,E0(ae,i))) $PROD:MT(j,t)$MT0(j) s:sigmaMT(j) O:PMT(j,t) Q:(SUM(ae,M0(ae,j))) I:PM(ae,j,t) Q:M0(ae,j) $PROD:E(ae,i,t)$E0(ae,i) O:PFX(t) Q:(E0(ae,i)*Pwe0(ae,i)) a:GOV(t) t:taue(ae,i) I:PE(ae,i,t) Q:E0(ae,i) 2/13/201417

19. $PROD:M(ae,j,t)$M0(ae,j) O:PM(ae,j,t)$M0(ae,j) Q:(M0(ae,j)) I:PFX(t) Q:(Pwm0(ae,j)*M0(ae,j)) a:GOV(t) t:tm(ae,j,t) $PROD:Q(j,t) s:sigmaQ(j) O:PQ(j,t) Q:(Q0(j)/(1-tauz(j))) a:GOV(t) t:tz(j,t) I:PD(j,t) Q:D0(j) I:PMT(j,t) Q:MT0(j) $DEMAND:GOV(t) D:PK(t) Q:(S0('Gov')) P:Pref(t) E:PG(t) Q:(-SUM(i,C0('Gov',i))*Qref(t)) E:RK(t) Q:(spf("Gov","Cap")) R:K(t) * Direct Taxes E:PG(t) Q:(1) R:DTax("Hou",t) * Transferts E:PC(t) Q:(SUM(ag,(Trn0(ag,"Gov")-Trn0("Gov",ag)))*Qref(t)) E:PC(t) Q:(1) R:TRF(t) 2/13/201418

20. $DEMAND:HOU(t) D:PC(t) Q:(SUM(i,C0('Hou',i)-C0_('Hou',i))) P:Pref(t) E:PQ(i,t) Q:(-C0_('Hou',i)*Qref(t)) D:PK(t) Q:((S0('Hou'))) P:Pref(t) E:RK(t) Q:(spf("Hou","Cap")) R:K(t) E:PN(t) Q:(spf("Hou","Ene")*SUM(i,F0('Ene',i))*Qref(t)) E:PL(i,t) Q:(spf("Hou","Lab")*F0('Lab',i)*Qref(t)) R:PLF(i,t) R:MK(i,t) * Direct Taxes E:PG(t) Q:(-1) R:DTax("Hou",t) * Transferts E:PC(t) Q:(SUM(ag,(Trn0(ag,"Hou")-Trn0("Hou",ag)))*Qref(t)) $DEMAND:ROW(t) D:PK(t) Q:(SUM(ae,S0(ae))) P:Pref(t) E:PL(i,t) Q:(SUM(ae,spf(ae,"Lab")*F0('Lab',i)*Qref(t))) R:PLF(i,t) R:MK(i,t) E:RK(t) Q:(SUM(ae,spf(ae,"Cap"))) R:K(t) E:PFX(t) Q:(-SUM(ae,B0(ae))*Qref(t)) R:BOP(t) 2/13/201419

21. * Transferts E:PC(t) Q:(SUM(ag,SUM(ae,(Trn0(ag,ae)-Trn0(ae,ag))))*Qref(t)) E:PC(t) Q:(-1) R:TRF(t) $CONSTRAINT:DTax(ac,t) DTax(ac,t) =E= Taud(ac)*(SUM(f,SAM(ac,f))*CTH(t)) ; $CONSTRAINT:K(t) K(t) =E= SUM(i,F0('cap',i))$T1(t) +(1-delta)*K(t-1) + (IT(t-1))*IT0*(r+delta) ; * Contrainsts on model structure $CONSTRAINT:BOP(t) PFX(t) =E= PRef(t) ; $CONSTRAINT:MK(i,t) PQ(i,t) =E= PRef(t) ; $CONSTRAINT:PLF(i,t) PL(i,t) =E= PRef(t) ; 2/13/201420