AN INTEGRATED DECISION SUPPORT FRAMEWORK FOR MACROECONOMIC POLICY MAKING BASED ON EARLY WARNING THEORIES
KIN KEUNG LAI
Macroeconomic policy making is a complex systematic process, which requires in-depth understanding of current economic situation, prediction of future economic trend, and proper policy evaluation measurements. Instruments of early warning, and policy simulation are often employed in macroeconomic policy making. However, no matter how well it is developed, any single instrument is often inadequate for policy making support, because of the gap between theories and practice. In this paper, macroeconomic early warning theories are integrated with the policy decision support concepts. Three stages are involved in the macroeconomic policy making process: monitoring, forecasting, and policy simulation. Based on this idea, an integrated alertâresponse framework is proposed with one corresponding module for each stage. Within this framework, not only information can be exchanged freely among these modules, but the monitoringâforecastingâsimulation process can run smoothly to realize timeliness and efficient policy making support. Moreover, a knowledge base is incorporated into the framework to support the economic early warning and policy making support process. Therefore, this framework is featured in integration and a final all-round report, including current economic status, future trend prediction, policy making suggestions, external information, and expert opinions, can be generated. An implementation of this framework was developed for China's macroeconomic adjustment and has been put into practice since early 2006. A case of national economic growth analysis based on the proposed framework is given to demonstrate how the framework serves for government policy making routines.
Macroeconomic policy making, decision support system, macroeconomic early warning
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