Yugoslav Journal of Operations Research (Jan 2002)
An expert system for national economy model simulations
Abstract
There are some fundamental economic uncertainties. We cannot forecast economic events with a very high scientific precision. It is very clear that there does not exist a unique 'general' model, which can yield all answers to a wide range of macroeconomic issues. Therefore, we use several different kinds of models on segments of the macroeconomic problem. Different models can distinguish/solve economy desegregation, time series analysis and other subfactors involved in macroeconomic problem solving. A major issue becomes finding a meaningful method to link these econometric models. Macroeconomic models were linked through development of an Expert System for National Economy Model Simulations (ESNEMS). ESNEMS consists of five parts: (1) small-scale short-term national econometric model, (2) Methodology of Interactive Nonlinear Goal Programming (MINGP), (3) data-base of historical macro-economic aggregates, (4) software interface for interactive communications between a model and a decision maker, and (5) software for solving problems. ESNEMS was developed to model the optimum macro-economic policy of a developing country (SFRY-formerly Yugoslavia). Most econometric models are very complex. Optimizing of the economic policy is typically defined as a nonlinear goal programming problem. To solve/optimize these models, a new methodology, MINGP, was developed as a part of ESNEMS. MINGP is methodologically based on linear goal programming and feasible directions method. Using Euler's Homogeneous Function Theorem, MINGP linearizes nonlinear homogeneous functions. The highest priorities in minimizing the objective function are the growth of gross domestic product and the decrease of inflation. In the core of the optimization model, MINGP, there is a small-scale econometric model. This model was designed through analysis of the causal relations in the SFRY's social reproduction process of the past 20 years. The objective of the econometric model is to simulate potential short term (one-year) national economic policies. Ex-ante simulation and optimization of economic policy for 1986 showed that, in SFRY, non-consistent macro-economic policy was resolute and led to both slower economic development and more rapid growth of inflation.
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