Copper Forecasting Chile – COFORCE Methodology Report

The research project “Development of sustainable strategies in the Chilean mining sector through a regionalized national model” will analyse the socio-economic impacts of copper on the Chilean economy. For this, a regionalized national model was developed from scratch. It is based on the modelling philosophy of the INFORUM group and characterized as a macro-econometric input-output-model. The analysis of copper and mining sectors is a major issue in Chile. Many studies have focused on this research area, but mainly do ex post analysis and use General Equilibrium Models. Different to these approaches, we built a dynamic input-output-model for the Chilean economy where parameters are estimated and the model equations are solved iteratively over time and no equilibrium conditions are met. That means for instance, that the labour market does not necessarily balance in the long run as well. The main features of the model are bottom-up modelling on 73 industry level, total integration of input-output-tables and national accounts that consider not only inter-industry relations but also income distribution and use. Further characteristics are bounded rationality of economic actors, imperfect markets as well as price rigidities. Demand and supply are both treated equally. The projection horizon of the model is 2035. The data used are official datasets compiled and provided by the Chilean project partners. This paper is a methodology report on the construction of the model. It describes the general modelling concept and illustrates first results of the baseline scenario, which includes major indicators of the total economy and its sectors.