A Reference Point Approach to Nonlinear Macroeconomic Multiobjective Models

Grauer, M. & Zalai, E. (1982). A Reference Point Approach to Nonlinear Macroeconomic Multiobjective Models. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-82-134

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Abstract

Programming-type multisectoral macroeconomic planning models are almost exclusively linear. Also, they often rely on traditional approaches such as sensitivity analysis and aggregated social welfare functions in their treatment of multiple conflicting objectives. In this paper the traditional linear programming framework is extended to handle nonlinear models and combined with an adaptive interactive decision support system to deal with multiple objectives. The decision support system is based on the reference point method.

Results obtained from a simplified model of the Hungarian economy provide a numerical illustration of the approach, and an appendix containing an analysis of the shadow prices derived from the linear and nonlinear planning models is also given.

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