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Policies to Reduce Unemployment: Simulations with Treasury Macroeconomic Model

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  • LEI LEI SONG
  • JOHN FREEBAIRN

Abstract

A modified Treasury Macroeconomic model is used to assess the relative effects of policy options to reduce unemployment. Simulation results are reported for the Australian economy starting at either a high or a low rate of unemployment. Over the next 10 years or so, all policies are projected to generate cyclical gains and losses in macroeconomic outcomes, including unemployment, relative to the base‐case scenario, before converging to an exogenous long‐run equilibrium growth path. The structure, amplitudes and other details of the cyclical responses vary both with the policy option and with whether the starting economy unemployment rate is close to the non‐accelerating‐inflation rate of unemployment or at a much higher rate.

Suggested Citation

  • Lei Lei Song & John Freebairn, 2005. "Policies to Reduce Unemployment: Simulations with Treasury Macroeconomic Model," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 351-366, December.
    • Handle: RePEc:bla:ecorec:v:81:y:2005:i:255:p:351-366
    DOI: 10.1111/j.1475-4932.2005.00274.x
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    References listed on IDEAS

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    Cited by:

    1. Marika Karanassou & Hector Sala, 2010. "Labour Market Dynamics in Australia: What Drives Unemployment?," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 185-209, June.

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