In the construction of DREAM, emphasis has been put on thoroughly describing economic factors that influence government finances as well as the economy in general. To name a few: the aging of the population, retirement from the labour market, developments in education levels and composition, oil and gas in the North Sea, political reforms, etc.
Long-term economic developments are largely determined by population demographics, education, labour force participation and pension savings. For this reason, forecasts of these variables are made separately and then combined to forecast the relationship between these factors in a general equilibrium model.
The general equilibrium model DREAM forecasts economic factors such as GDP, net exports, consumption, public spending, tax revenue, and resultantly, the government balance and debt.
The results of a DREAM forecast are summarised by an indicator of fiscal sustainability. The indicator measures the extent to which expected future government revenue can cover expected future expenditure.
In addition to generating government budget forecasts, DREAM is suitable for evaluating the long-term effects of a broad range of specific policy reforms. What are the long-term effects of an increase in the labour force due to an increase in the pension age? What are the effects of an increase in the number of graduates with tertiary education? Or what happens if immigrant employment rates converge with the that of Danes?
Introduction to the DREAM-model-system