COMPACT: a rational expectations, intertemporal model of the United Kingdom economy

COMPACT is a quarterly macro econometric model of the UK primarily designed for policy analysis. The model includes a consumption function derived exp licitly from intertemporal optimisation, a vintage production technology, n ominal rigidities in wage and price setting, and trade equations which are influenced by the variety and quality of production relative to the rest of the world. We discuss the overall properties of the model, as well as feat ures of major equations. We stress the importance of relating these propert ies to simpler theoretical paradigms. Several simulations illustrating key properties of COMPACT are presented. A complete equation listing is provide d in an Appendix. (C) 1999 Elsevier Science B.V. All rights reserved.