SIGMA: A New Open Economy Model for Policy Analysis
by Christopher J. Erceg, Luca Guerrieri, and 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.
JEL Codes: E32, F41.
Full article (PDF, 50 pages 2718 kb)