Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
SIGMA: A New Open Economy Model for Policy Analysis
AbstractIn this paper, we describe a new multi-country open economy SDGE model named "SIGMA" that we have developed as a quantitative tool for policy analysis. We compare SIGMA's implications to those of an estimated large scale econometric policy model (the FRB/Global model) for an array of shocks that are often examined in policy simulations. We show that SIGMA’s implications for the near-term responses of key variables are generally similar to those of FRB/Global. Nevertheless, some quantitative disparities between the two models remain due to certain restrictive aspects of SIGMA’s optimization-based framework. We conclude by using long-term simulations to illustrate some areas of comparative advantage of our SDGE modeling framework.
Cite this item
Christopher J. Erceg & Luca Guerrieri & Christopher J. Gust, SIGMA: A New Open Economy Model for Policy Analysis, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 835, Jul 2005, revised Jan 2006.
JEL Classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
Keywords: SDGE model; Open-economy macroeconomics
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