|**Tool name:**|**Integrated Macroeconomic Model for Poverty Analysis**|
|---|---|
|**What is it?**|IMMPA is a dynamic CGE model.|
|**What can it be used for?**|IMMPA can be used to analyze the impact of macroeconomic policy and external shocks on income<br>distribution, employment, and poverty.|
|**What does it tell you?**|One of the main features of IMMPA is that it integrates the real and financial sides of the economy; in<br>this regard, IMMPA is useful for analyzing both the impact of structural reforms (such as changes in<br>tariffs or the composition of public expenditure) and the effects of short-term stabilization policies<br>(such as a cut in domestic credit or a rise in deposit interest rates). The detailed treatment of the labor<br>market is key for the assessment of the poverty reduction impact of macroeconomic policies. Also, it is<br>useful for drawing the distinction between rural and urban sectors by completing separate projections<br>on output and employment fluctuations for both areas and therefore to study poverty in different<br>geographical areas.|
|**Complementary tools:**|IMMPA would complement and be complemented by the use of household surveys to map impacts<br>into distributional changes. Stakeholder analysis can be useful for identifying different groups that are<br>of interest.|
|**Key Elements:**|The main features that distinguish IMMPA from other CGE models are as follows. First, IMMPA<br>offers a very detailed specification of the labor market, which is the main transmission channel of<br>macroeconomic shocks and adjustment policies to economic activity, employment, and relative prices.<br>The labor-market specification permits a disaggregation at the urban and rural levels and, within each<br>level, in the formal and informal sectors. Second, IMMPA links real and financial sectors through an<br>explicit treatment of the financial system. Third, the model emphasizes the negative effect of external<br>debt on private investment and therefore incorporates the possibility of debt overhang. Finally,<br>IMMPA accounts explicitly for the channels through which various types of public investment outlay<br>affect the economy.|
|**Data/information:**<br>**ents**|The greatest drawback of any fully specified CGE model is the time and data required to construct it.<br>The model must be constructed from combined national accounts and survey data. These are first<br>compiled into a SAM, which is then used as the foundation for the model. IMMPA, for example,<br>consists of 131 equations, more than 30 exogenous variables, and more than 200 endogenous variables.|
|**Time:**<br>**irem**|The process can take more than a year and rarely less than a few months.|
|**Skills:**<br>**equ**|Experienced modelers with substantial prior exposure to CGE models are required.|
|**Supporting**<br>**software:**<br>**R**|EViews, Excel.|
|**Financial cost:**|US$75,000 to develop the IMMPA general equilibrium model.|
|**Limitations:**|CGE simulations depend to a large extent on the assumptions made in the model, especially those that<br>are required to close the model. They are also data intensive and difficult to master, which could limit<br>the usefulness of the model under tight deadlines or capacityconstraints.|
|**References and**<br>**applications:**|�<br>Agénor, Izquierdo, and Fofack (2003).|

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