This paper deals with the modelling of the wake effect in wind farms for use in dynamic power system simulation software. First, basic relationships describing the leeside wind speed as a function of the incoming wind speed under ideal conditions are put together. Through aerodynamic efficiency considerations the ideal power-coefficient of the turbine is then related to the actual power coefficient provided by the turbine manufacturer. Finally, mathematical expressions are formulated for the wake wind speed in relation to location within the park and the wind direction. The model thus obtained is implemented on a power system simulation package as an additional feature. Together with the full range of capabilities of the package for steady state as well as dynamic analysis, the model enables an in-depth study of the wake effect and its impact on the farm in terms of output power and its interactions with the network. Some results illustrating the impact of the wake effect on steady state system operation have been presented.