THE EFFECTS OF CURRENT FISCAL RESTRAINT ON THE AUSTRALIAN ECONOMY: An Applied General Equilibrium Analysis with Imperfect Competition

The objective of this paper is to examine the short run and long run effects of the reduction of government expenditure on the Australian economy using an applied general equilibrium model, which incorporates economies of scale and impediect competition. The paper describes a 23-sector computable general equilibrium model of the Australian economy, and covers short-run as well as long-run profitmaximising behaviour of the firm. Economies of scale are incorporated in the model at the industry level and the firm level. The pricing behaviour is modelled as perfectly competitive, monopolistically competitive and in other ad hoc ways, as in Harris (1984). The different assumptions about technology, pricing behaviour and firm entry are combined in various ways to produce a variety of scenarios in our simulations. We present results for three different types of non-competitive regime and compare these with results generated by a traditional version of the same model.

Issue Date:
Apr 01 1999
Publication Type:
Working or Discussion Paper
Record Identifier:
Total Pages:
JEL Codes:
C68; L11; L13
Series Statement:
Preliminary Working Paper No. OP-91

 Record created 2018-01-05, last modified 2018-01-22

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