Does the microsimulation approach used in macro–micro modelling matter? An application to the distributional effects of capital outflows during Argentina's Currency Board regime

Abstract

We provide a novel comparison between the behavioural and the non-parametric microsimulation approach. Coupled with a CGE model, we consider the distributional effects of the significant capital outflows faced by the Argentinean economy at the end of its Currency Board, in a context with significant macroeconomic similarities to the present crisis in Greece. Both the relatively straightforward ‘non-parametric’ approach and the more complex behavioural approach lead to distributional results that are consistent with the data, suggesting that both are viable alternatives. Looking forward, it would be desirable for researchers to look for additional evidence regarding the distributional effects that these microsimulation models can illuminate for given macroeconomic shocks.