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SIGMA: A New Open Economy Model for Policy Analysis

  • Erceg, Christopher
  • Guerriei, Luca
  • Gust, Christopher

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(2006): pp. 1-50
Handle: RePEc:pra:mprapa:813
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