DELFI: a semi-structural model of the Dutch economy

DELFI: a semi-structural model of the Dutch economy

The modelling of the economy in DELFI combines the neoclassical approach to economics - with optimizing rational economic agents and clearing markets - with new-Keynesian elements, in which imperfections and frictions affect the short-run dynamics of product, labour market and financial markets. The new, extended version – DELFI 2.0 - includes a detailed sub-model of both the banking and pension sectors, this offers an elaborate framework for analyzing the linkages between the financial sector and the real economy.

In DELFI we put emphasis on an explicit and consistent modelling of the supply side of the economy, which is crucial for understanding long-term developments. The inclusion of an elaborate detailed model of the banking sector means that shocks originating in the financial sector can be fully endogenized in the model. Changes in the composition of the bank’s balance sheet (in particular changes in bank leverage), directly affect the price of credit for households and firms. Consequent changes in the demand for credit will transmit to real economic activity. Further real-financial linkages operate through a detailed model of the pension sector’s funding ratio. DELFI 2.0 also includes an explicit model of consumer confidence, which in periods of uncertainty can have a significant impact on the dynamics of household behaviour. DELFI is used for scenario analyses to produce DNB’s biannual projections (see Economic Developments and Outlook). The usual projection horizon includes the current year and the next two years. A description of the DELFI model can be found in the link below.

• Berben, R.P., I. Kearney and R. Vermeulen, 2018, DELFI 2.0, DNB's Macroeconomic Policy Model of the Netherlands, DNB Occasional Study 5, September 2018 (link)

Voor een Nederlandstalige toelichting zie deze link

You can try the DELFI model yourself

The DELFI-tool is intended for pupils, students, teachers, policymakers, journalists and anyone else who is interested in macroeconomics and wants to draw up economic scenarios themselves.

Get behind the controls of the Dutch economy with our DELFI-tool and discover, for example, the consequences of higher energy prices or higher wages.