Historical simulations with a dynamic CGE model: results for an emerging economy

Policy analysis with a dynamic CGE model requires a baseline solution that is a plausible forecast of the whole set of model's variables. An important issue in the development of the baseline forecast is to account for structural change. This is aided by the technique of historical simulations which helps identify the characteristics of structural change in the past. In this study we present our experiences with historical simulations using a recursive-dynamic CGE model for Poland. In historical simulations with a CGE model the observable macro and industry variables are exogenised, while endogenising technology and taste parameters. This allows to uncover the movements of the latter, which we do year-by-year. Preliminary results show a relatively large variation of technology and taste parameters required to fit the data. We expect the final results to shed some light on the issue of reliability of CGE baseline forecasts for an emerging economy.