SIGMA
Subtitle: a new open economy model for policy analysis
By: Christopher Erceg, Luca Guerrieri, Christopher Gust.
Contributors: Guerrieri, Luca.; Gust, Christopher J.; Board of Governors of the Federal Reserve System (U.S.)
Series: International finance discussion papers ;; no. 835; International finance discussion papers (Online) ;; no. 835.
Publisher: Federal Reserve Board
Published: 2005
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "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 open-economy policy simulations.  We show that SIGMA's implications for the near-term (2-3 year) responses of key variables are generally similar to those of FRB/Global.  Two features of our modeling framework, including rational expectations with learning, and the inclusion of some non-Ricardian agents, play an important role in giving SIGMA more flexibility to generate responses akin to the econometric policy model; 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.  These include linking model responses to underlying structural features of the economy, and fully articulating the endogenous channels through which "imbalances" arising from various shocks are alleviated"--Federal Reserve Board web site.
Notes: Includes bibliographical references.
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