The MONASH Model

A Dynamic General Equilibrium Model of the Australian Economy

Since 1993, the Centre of Policy Studies (CoPS) has developed MONASH, a dynamic computable general equilibrium (CGE) model of the Australian economy designed for forecasting and for policy analysis. Like its predecessor, ORANI, MONASH has a high level of microeconomic detail. Unlike ORANI, it has a strong forecasting capability. This is due to:

For example, while ORANI was limited to answering comparative static questions such as: "What will be the effect on the output of motor vehicles five years after a reduction in tariffs?", MONASH in addition provides two year-by-year forecasts of motor vehicle output over the next five years, corresponding to scenarios either with or without the tariff reduction. Thus MONASH can analyse issues such as labour market dislocation or adjustment costs which other CGE models, which do not produce a base case forecast, are unable to address.

The key to generating believable forecasts is to use detailed information available from expert groups specializing in the analysis of different aspects of the economy. MONASH forecasts incorporate a wide variety of information including:

Using this information the model generates forecasts for 113 industries and 115 commodities. These can be transformed into forecasts for 860 sub-commodities, 341 labour occupations, 56 regions and many types of households.

The initial applications of MONASH were made for State and Commonwealth government departments requiring detailed employment forecasts. The model continues to be used for this purpose. However in the last two years the main enhancements to the model have been directed at policy analysis. This has lead to papers on a wide range of issues including:

See also:

Forecasting and Policy Analysis with a Dynamic CGE Model of Australia, June 1998
Peter B. Dixon and Maureen T. Rimmer
(Available electronically)

Report prepared for the Senate Select Committee on a New Tax System: The Government's Tax Package: Further Analysis based on the Monash Model.
Peter B. Dixon and Maureen T. Rimmer
(Available electronically)

Some technical details of the MONASH model

The MONASH Model is fully documented in the book Dynamic General Equilibrium Modelling for Forecasting and Policy: A Practical Guide and Documentation of MONASH published by North-Holland in 2002.

You can download material from an earlier version (May 2001) of the book that was too detailed for inclusion in the final version. This material will be valuable to people who want to run MONASH or to build their own detailed dynamic model.

You can download a Demonstration Version of the RunMONASH software used to carry out applications with MONASH. You can use this software to replicate the main application described in the MONASH Book.