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SIGMA: A New Open Economy Model for Policy Analysis

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  • Erceg, Christopher J.
  • Guerrieri, Luca
  • Gust, Christopher J.

Abstract

In 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.

Suggested Citation

  • Erceg, Christopher J. & Guerrieri, Luca & Gust, Christopher J., 2005. "SIGMA: A New Open Economy Model for Policy Analysis," International Finance Discussion Papers 835, Board of Governors of the Federal Reserve System (U.S.), revised Jan 2006.
  • Handle: RePEc:fip:fedgif:835
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    References listed on IDEAS

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    More about this item

    Keywords

    SDGE model; Open-economy macroeconomics;

    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

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