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SIGMA: A New Open Economy Model for Policy Analysis

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Author Info
Erceg, Christopher
Guerriei, Luca
Gust, Christopher

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Abstract

In this paper, we describe a new multicountry 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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 813.

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Date of creation: 13 Jan 2006
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Publication status: Published in International Journal of Central Banking Number 1.Volume 2(2006): pp. 1-50
Handle: RePEc:pra:mprapa:813

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G00 - Financial Economics - - General - - - General
G0 - Financial Economics - - General

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