Regional Policy:
Murphy Model Regional (MMR)
Development
In 2000, Econtech developed the Murphy Model Regional (MMR) as a tool for analysing the effects of
policies that are not national in scope, but rather are state or region specific.
MMR is a multi-region, multi-industry model of Australia. It is in the Computable General
Equilibrium (CGE) family of economic models.
Features
- MMR divides Australia into 32 regions. Each region is modelled individually but following a
consistent approach. MMR is calibrated using the latest annual regional data from the ABS labour force survey.
- In MMR, each region contains 18 industries corresponding to the ANZSIC industry divisions used by the ABS.
- MMR models a medium-term equilibrium for each regional economy, which would be broadly achieved over
a period of about 3 years.
- MMR distinguishes between industries that produce tradeables and industries that produce non-tradeables.
Documentation
The medium-term equilibrium in MMR is based on specific economic assumptions.
On the one hand, it is far enough into the future for equilibrium to be attained in product markets. Also, consumer
spending is at a sustainable level so that the trade account for each region, taking into account both international
and inter-regional trade, is in balance.
On the other hand, the medium-term equilibrium is not far enough into the future for labour markets to attain
equilibrium; rather industry wage rates are taken as given. It is also not far enough into the future for businesses
in each region to adjust their capital stocks.
The distinction between industries that produce tradeables and industries that produce non-tradeables is also based
on specific economic assumptions.
Industries that produce tradeables have a national or international focus, and production levels are driven by
prices prevailing on national or world markets.
Industries that produce non-tradeables focus on their own region and production levels depend on local demand.
MMR is flexibly configured so that individual industries can be treated as either producing tradeables or
non-tradeables, depending on what makes more economic sense in the context of the particular regional policy.
download regions and industries in MMR
Consulting
MMR is used extensively in our industry consulting work.
For more information, email Jodie Patron or phone her on (02) 6295 0527.
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