How will the Dutch economy respond to stronger world trade growth, higher oil prices, wage moderation, tax increases or house price rises? The DELFI tool is designed to answer these questions in a simplified way, allowing users to adjust (or “shock”) the underlying economic model by changing the direction (up or down), size and duration of one or two economic variables. Users can choose from the following variables: world trade growth; oil prices; long-term interest rates; effective exchange rates; public spending (balanced budget); wage and income tax; labour supply growth; wage growth; pension contributions; share prices, and house prices. The DELFI tool computes the macroeconomic impact of the shock over an eight-year horizon. It then compares the simulation results with DNB’s baseline projection, which represents the development of the Dutch economy without the selected shocks.
The DELFI tool simulates the development of sixteen key economic variables, including GDP, consumption, unemployment and the budgetary balance. The simulation results are presented in tables and charts, which can then be compared with the baseline projection. This gives users an indication of the impact of the selected shocks on the Dutch economy. The results are based on simplified calculations with DNB’s macroeconomic DELFI model.
The example below shows the effect of a positive shock to world trade (7% annual growth instead of 5% in the baseline projection) on GDP volume growth. GDP grows more rapidly than the 1.5% projected in the baseline, peaking at over 2% in the fourth year before slackening somewhat. To help the user understand the results, the DELFI tool provides a detailed description explaining the economic mechanisms underlying the model for each of the eleven variables that can be changed.
Figure: GDP (volume) (% change)