Visualisation in the Simulation and Control of Economic Models

Abstract

Simulation of economic models is frequently used in the investigation of economic policy. Yet one of the problems with simulation is that it can be difficult to appreciate the model properties due to the nature of the simulation process. Stochastic simulation, for example, can produce large quantities of output which can be difficult to comprehend. Further, when mathematically sophisticated techniques such as the use of optimal control and Kalman Filtering are applied to models, the simulation process can become even more complex. Visualisation techniques in model building, simulation, and analysis of simulation output can help reduce the complexity. This is especially the case with interactive simulation. In this paper we investigate the use of visualisation in simulation by examining the application of optimal control techniques to a stochastic forward looking analytic economic model. We also use interactive object oriented simulation software where objects, such as components of models or graphs of outputs, can be visually manipulated to form simulation systems. We find that the use of visualisation can make the investigation of policy analysis issues with such models more comprehensible.