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SIGMA: A New Open Economy Model for Policy Analysis

  • Christopher J. Erceg

    (Federal Reserve Board)

  • Luca Guerrieri

    (Federal Reserve Board)

  • Christopher Gust

    (Federal Reserve Board)

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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Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 2 (2006)
Issue (Month): 1 (March)

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Handle: RePEc:ijc:ijcjou:y:2006:q:1:a:1
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