IMF Staff Papers, Volume 55, No. 2

IMF Staff Papers, June 18, 2008

Source details

Special issue devoted to the Global Economy Model (GEM), a dynamic stochastic general equilibrium model.
GEM is described as widely used by the IMF and central banks worldwide to study issues not adequately addressed with reduced-form econometric models or earlier macromodels whose dynamic equations lacked strong choice-theoretic foundations.
Composition of the issue:
- Douglas Laxton discusses the GEM philosophy and explains how modelers find solutions to systems of nonlinear equations.
- Paolo Pesenti lays out the structure of the model in detail, explaining derivation of GEM equations from individual and firm-level self-interested maximizing behavior and interaction of individual decisions with government policy rules.
- Six remaining papers present specific applications of the GEM structure to a variety of real problems and policy issues.

Model class and purpose:
- Dynamic stochastic general equilibrium framework (GEM).
- Emphasizes choice-theoretic foundations for dynamic equations.
Solution approach:
- Focus on solving systems of nonlinear equations (as discussed by Douglas Laxton).
Microfoundations:
- Equations are derived from individual and firm-level self-interested maximizing behavior (as presented by Paolo Pesenti).
Policy interaction:
- Individual decisions interact with government policy rules within the GEM structure.
Applications:
- Six applied papers use GEM to study a variety of real problems and policy issues (topics not enumerated beyond this description in the source).

Subject areas listed:
- Consumption, Energy prices, Inflation, Labor, National accounts, Oil prices, Prices
Keywords included:
- adjustment cost, Asia and Pacific, Central and Eastern Europe, Consumption, energy price, Energy prices, Europe, Global, Inflation, NM economy, nominal interest rate, oil price, Oil prices, oil-importing region, PLPT, SP