Research at the IMF

MULTIMOD Mark III Econometric Model



GEM: A New International Macroeconomic Model

Prepared by the Research Department

January 2004

The views expressed in this paper are those of the staff and do not necessarily reflect the views of the Executive Board of the IMF.

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Also see November 2004 version, published in the Occasional Paper series

Contents
I. Introduction
II Philosophy and Approach
III. How Has GEM Been Used?
IV. Current Development Work
V. The Road Ahead
Issues for Discussion
References
Boxes
II-1. Estimating Parameter Values
III-1. GEM Simulations of the Benefits of Greater Euro Area Competition
III-2. Using GEM to Analyze Monetary Policy Rules
Figures
II-1. Stylized View of Model Development
II-2. Simple GEM Structure
II-3. More Complicated GEM Structure
II-4. Dynamic Responses of GEM Compared to Large Forecasting Models
II-5. Dynamic Responses of GEM Compared to a VAR
III-1. Dynamic Effects of More Competition-friendly Policies in the Euro Area
III-2. Taylor Tradeoff in Monetary Policy Analysis
III-3. GEM: Impact of a Permanent 20 percent Increase in Oil Prices After One Year
III-4. GEM: Impact of a Permanent and Temporary 20 Percent Oil Price Hike After One Year
IV-1. Structural Fiscal Balances in the Major Economic Regions
IV-2. The Sum of International Assets and Liabilities in the G7
IV-3. Capital Constraints for Emerging Markets
Tables
II-1. Stylized View of the Strengths and Weaknesses of Successive Generations of Macro Models
III-1. GEM Estimates of the Long-Run Effects of More Competition-friendly Policies in the Euro Area
III-2. MULTIMOD: Impact of a Permanent $5 a Barrel Increase in Oil Prices After One Year