Models and methods for economic policy; 60 years of evolution at CPB

The Netherlands Bureau for Economic Policy Analysis (CPB) has been involved in econometric model building since its foundation in 1945. During the 60 years of model building and use reviewed in this Discussion Paper, CPB's models have evolved significantly. Over this period, a shift of emphasis can be observed from econometrics and empiricism to economic theory. New questions from policymakers and new features in the national economy have guided research, while new developments in econometrics and economic theory were taken on board wherever they helped to improve the quality and scope of the analysis. Although considerable progress has been achieved in several spheres, the models continue to be riddled with some long-standing limitations and weaknesses which the model users should take into account.

Are houses overvalued in the Netherlands?

The movement of the level of house prices in the Netherlands between 1980 and 2007 is explainable fairly well by fundamental supply and demand factors. Empirical research has shown that the overvaluation of approximately 10% that existed in 2003 shrunk to approximately 0% in 2007. This was not caused by downward correction of house prices, but by the circumstance that the increase of the actual house price between 2003 and 2007 lagged behind the increase of the long-term value of the house price. Therefore, this does not confirm the IMF's recently published research results, indicating that approximately 30% of the house price increase between 1997 and 2007 cannot be explained by fundamental factors.

Decomposition of GDP-growth in some European Countries and the United States

The composition of economic growth can be analyzed in two different ways. In the 'traditional method' for the decomposition of GDP growth, total imports are deducted from exports. This approach underestimates the importance of exports for the growth in GDP, and overestimates the importance of domestic expenditure categories. In the alternative methodology proposed in this paper, imports are allocated to all expenditure categories. Although this 'import-adjusted method' is more complex than the 'traditional method', it has the considerable advantage that the contributions of the expenditure categories to GDP growth provide a better understanding of why GDP growth decelerates or accelerates. The methodology and data requirements for calculating the import content of final demand, and the implications for the decomposition of real GDP growth, are discussed. For six European countries and the United States, the paper shows that applying the alternative methodology provides rather a different economic story.

Decomposition of GDP growth in European countries; different methods tell different stories

The composition of economic growth can be analysed in two different ways. In the 'traditional method' for the decomposition of GDP growth, total imports are deducted from exports. This approach underestimates the importance of exports for the growth in GDP, and overestimates the importance of domestic expenditure categories. In the alternative methodology proposed in this paper, imports are allocated to all expenditure categories. Although this 'import-adjusted method' is more complex than the 'traditional method', it has the considerable advantage that the contributions of the expenditure categories to GDP growth provide a better understanding of why GDP growth decelerates or accelerates. The methodology for calculating the import content of final demand, and the implications for the decomposition of real GDP growth, are discussed. For six individual European countries and the euro area, the paper shows that applying the alternative methodology provides rather a different economic story.

SAFFIER; a multi-purpose model of the Dutch economy for short-term and medium-term analyses

Since late 2004, CPB Netherlands Bureau for Economic Policy Analysis has been using the macro-econometric model SAFFIER for its short-term and medium-term analyses. This model resulted from the integration of the quarterly model SAFE and the yearly model JADE. SAFFIER is a multi-purpose model. The quarterly version of the model, used for short-term analyses, only differs from its yearly version, used for medium-term analyses, in the specification of the lag structures. All other (non-technical) specifications are identical in both versions of the model. Simultaneously with the integration of SAFE and JADE, some innovations with respect to the modelling of the wage rate, private consumption, exports, the public sector and the house-price development have been incorporated. In the wage equation, the elasticity of the replacement rate is no longer constant, but is depending on the actual labour-market situation. This publication sketches the outlines of the SAFFIER model, focusing on the main innovations. In order to explain the working of the model, the results from a number of standard shocks are presented.

A leading indicator for the Dutch economy; methodological and empirical revision of the CPB system

Since 1990, CPB Netherlands Bureau for Economic Policy Analysis (CPB) has used a leading indicator in preparing short-term forecasts for the Dutch economy. This paper describes some recent methodological innovations as well as the current structure and empirical results of the revised CPB leading indicator. Special attention has been paid to the role and significance of IFO data. The structure of the CPB leading indicator is tailored to its use as a supplement to model-based projections, and thus has a unique character in several respects. The system of the CPB leading indicator is composed of ten separate composite indicators, seven for expenditure categories (‘demand’) and three for the main production sectors (‘supply’). This system approach has important advantages over the usual structure, in which the basis series are directly linked to a single reference series. The revised system, which uses 25 different basic series, performs quite well in describing the economic cycle of the GDP, in indicating the upturns and downturns, and in telling the story behind the business cycle.

Re-exports: international comparison and implications for performance indicators

Since the mid eighties, re-exports in the Netherlands has been booming, with the exception of a short interruption in 2001 and 2002. This research shows that a relatively strong growth of re-exports is not just a Dutch phenomenon, but that there is an international trend going on. Re-exported products are at least doubly counted in world trade figures. This international re-exports trend contributes to the fact that world trade volume is growing faster than the volume of world export production. Besides, there are some serious implications for the indicators of countries' exports performances. If one doesn't take account of the implications of the international re-exports trend, the relevant export market growth for Dutch manufactures as well as the loss of market share of Dutch industrialists are overestimated.

A Leading Indicator for the Dutch Economy – Methodological and Empirical Revision of the CPB System

Since 1990 the Netherlands Bureau for Economic Policy Analysis (CPB) uses a leading indicator in preparing short-term forecasts for the Dutch economy. This paper describes some recent methodological innovations as well as the current structure and empirical results of the revised CPB leading indicator. Special attention is paid to the role and significance of IFO data. The structure of the CPB leading indicator is tailored to its use as a supplement to model-based projections, and thus has a unique character in several respects. The system of the CPB leading indicator is composed of ten separate composite indicators, seven for expenditure categories (‘demand’) and three for the main production sectors (‘supply’). This system approach has important advantages over the usual structure, in which the basis series are directly linked to a single reference series. The revised system, which uses 25 different basic series, performs quite well in describing the economic cycle of GDP, in indicating the upturns and downturns, and in telling the story behind the business cycle.leading indicator, short-term forecasts

Can resource dependence and coercive isomorphism explain nonprofit organizations' compliance with reporting standards?

Nonprofit organizations worldwide are confronted with an increasing demand for accountability and improved financial transparency. Financial reporting by nonprofit organizations is no longer an exception, it has become a rule. The usefulness of a financial report to an organization’s stakeholders depends upon its quality. The latter is safeguarded by reporting standards as well as the commitment of the organization to fully implement these standards. Although resource dependence and coercive isomorphism have been used in earlier nonprofit organization research, no empirical research has linked these theories to compliance with financial reporting standards. Using a unique setting in which a large number of (very) large Belgian nonprofit organizations are confronted with far-reaching changes in financial reporting regulations, the effect of resource dependence and coercive isomorphism on accounting and financial reporting compliance is documented