DYNK

The Dynamic New Keynesian model (DYNK) is a macroeconomic model covering the economic activities of 76 to 90 sectors in a single region. It has an input-output table in its core. DYNK is a hybrid between an econometric input-output model and a Computable General Equilibrium (CGE) model.

It is an input-output model in the sense that it is demand driven, as all that is demanded is produced. On the supply side the capital market is not explicitly modelled and thereby not a limiting factor, unlike in CGE models. However, like in CGE models labour supply is a limiting factor to production in real terms through prices in the price system. The term "New Keynesian" refers to the existence of a long-run full employment equilibrium, which will not be reached in the short run, due to institutional rigidities.

The DYNK model provides an elaborated approach regarding consumption. Demand of private households is represented by a nested structure covering over 47 consumption categories and is determined endogenously by consumer behaviour. The representative private household is the sum of a subset of up to 250 household types which each differ in income sources, consumption patterns and behaviour.

In DYNK, the production structure of each sector is determined by a five-factor production function where the own- and cross-substitution elasticities of and between those factors are endogenous and determined by estimated coefficients using a translog specification.

A central feature is that monetary flows of the input-output structure are linked to physical satellite accounts data for energy and greenhouse gas emissions as well as the ability to link with bottom-up models. This allows evaluation of measures with respect to energy and emissions.

The model has been developed and extended over the last decade and has been applied in the course several studies most of which comprise coupling with bottom-up models and energy scenarios.