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 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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Last update: September 29, 2008