International macroeconomic adjustment, 1987-1992 : a world model approach

In forecasting key economic indicators for the major industrial countries, the Bank's Economic Analysis and Prospects Division (IECAP) does not rely on a completely linked global macroeconomic model. This paper asks if IECAP forecasts are consistent with those produced by linked models. To answer this, Bank assumptions about exchange rates and commodity prices are introduced into three global models (OECD, Project Link, and Wharton Econometrics). Following the introduction, section 2 explains the structure of each model. Section 3begins the process of explaining and elaborating on the differences in the forecasts, through a comparison of the key assumptions used in each model. Section 4 presents a comparison of the IECAP baseline with the baseline presented by each organization. In section 5, the results of model simulations using IECAP's assumptions for exchange rates and commodity prices are discussed. In section 6, an attempt is made to explain the differences in the projection results; following this a set of alternative scenarios using each model is presented. Finally, in the last section, the main conclusions are presented.