Economic models

Since 1997, DREAM has built five economic models. The models are used to project and forecast the Danish economy in both the short and long term as well as to evaluate effects of economic policy. In addition, an environmental economic model is under development.

The macroeconomic model DREAM

DREAM is a structural model with overlapping generations. The main objective of the model is to give insight into the long-term developments of government finances. The model is suitable for assessing long-term economic effects of changes in labor market policy, pension legislation, demographics, etc. The model is often used to assess fiscal sustainability.

The macroeconomic model MAKRO

DREAM is developing the new macroeconomic model MAKRO for the Ministry of Finance of Denmark. The MAKRO model’s purpose is to project and forecast the Danish economy in the medium to long term as well as to evaluate effects of economic policy. In doing so, it also integrates short-term government economic forecasts.

Microsimulation model SMILE

The microsimulation model, SMILE, makes it possible to analyse individual life cycles and to calculate distributions rather than averages of income, pension, etc. SMILE has been developed to forecast and analyse the long-run developments in demographics, household relocation patterns, labour market affiliation, education level, income, pensions as well as housing demand.

Multisector model REFORM

REFORM is a static multisector model with 73 economic sectors. The model is used by the Ministry of Finance of Denmark to assess structural GDP effects of all major policy proposals. DREAM also uses the model for various analyses, especially in the areas of competition, productivity and taxation.

Environmental and climate-economic model GreenREFORM

DREAM is in the process of developing a new environmental and climate-economic model for the Danish economy. The baseline simulation should provide a comprehensive assessment of how future economic development is expected to affect the environment and climate. Further, the baseline simulation should assess whether this development is compatible with the political goals within these areas.