Introduction: The Use of Simulation Models in Policy Analysis

This is an introduction to the papers in this special issue on policy simulations discussing a variety of simulation models. Simulation modelling has become a powerful tool to analyse hypothetical and actual policy changes. This issue contains analyses based on both macro- and micro-level data. The two macroeconomic-oriented papers use a General Equilibrium modelling approach with macro-level data, whereas the three microeconomic-oriented papers use detailed micro-level data to replicate the actual financial situation of Australian/New Zealand households by applying the rules and formulas of the taxation and social security systems for a sample representing the population. This introduction also provides an overview of directions for extension and improvement of models and the development of new types of models, combining micro and macro aspects.