Review of the FIDELIO model: A New Generation of Dynamic, Econometric and General Equilibrium Input-Output Model

This technical report reviews the FIDELIO model, a dynamic, econometric, and general equilibrium input-output model developed by the Joint Research Centre (JRC) of the European Commission. The review was conducted by a panel of experts to assess the model's scientific rigour, data foundation, empirical implementation, and peer-review status, in line with the EU's Better Regulation Policy and the Inter-Institutional Agreement on Better Law Making. The FIDELIO model is designed to estimate the socio-economic and environmental impacts of EU industrial, trade and innovation policies for a fair and sustainable EU economy, mostly oriented to demand policies but also flexible to incorporate supply policy shocks, too. It is built on a solid foundation of the FIGARO database, which is maintained by Eurostat, and aims to capture spillover and rebound effects to quantify impacts on jobs, growth, investments, resource use, emissions, and trade balance. The model has evolved through several versions, with the latest iteration featuring improvements in modularity, flexibility, and dynamic structure. The review panel's general comments commend the model's comprehensive approach, which blurs the lines between traditional IO systems, econometric IO systems, and computable general equilibrium models. The panel appreciates the model's disaggregation of industries and households, which allows for granular analysis. However, the panel also points out the need for regular updates to the FIGARO database, transparent documentation of empirical implementation, and continuous exposure of the model to the scientific community and policymakers. Specific comments from individual panel members address various aspects of the model, including the need for a clear statement of the EU policy objectives of the European Union where FIDELIO will have to be applied, the suitability of the model for contributing to well-being measures, and the importance of capturing the dynamics of competition and market power. The panel also suggests improvements in the treatment of technological change, flexibility, and substitutability, as well as the integration of financial accounts and regional integration, qualitative changes in the economy, demographic challenges, and micro-macro links within the model. In response to the review, the FIDELIO team has proposed several lines of action to enhance the model's capabilities. These include updating the FIGARO database, refining parameter estimation and calibration, exploring new production functions, incorporating firm heterogeneity, and developing a FIDELIO community for collaborative development and use of the model. The team also plans to publish a flagship article on the model and maintain transparent documentation to facilitate knowledge transfer within the team. The FIDELIO model is a critical tool for EU policy analysis, with the review providing valuable insights for its improvement. The proposed actions by the FIDELIO team aim to address the panel's recommendations and ensure the model. Overall, the FIDELIO model presents a comprehensive and transparent tool for analysing EU policy impacts in the European economy, with potential areas for further refinement and extensions to address evolving complexities and improve its credibility and applicability.