The Independent Authority for Fiscal Responsibility (AIReF) presented the MEGAIReF model at an internal seminar today – its own model of the family of Dynamic Stochastic General Equilibrium Models (DSGE) – developed in collaboration with Pompeu Fabra University, which will enable the institution to simulate and assess shocks and structural measures in the medium term on key variables such as growth, expenditure, inflation, the deficit and public debt.
AIReF has a range of tools at its disposal to fulfil its mission of overseeing the sustainability of public finances with rigour and credibility. These tools range from the very short term, with models such as MIPred, which estimates GDP growth, to the very long term, with population and growth models.
However, until now, AIReF did not have its own DSGE model, which is widely used by economic institutions at an international and national level, and used the European Commission’s model as and when necessary. For this reason, it began working last year with Professor Davide Debortoli’s team at Pompeu Fabra University to develop the model presented today, which will soon be unveiled at an external seminar.
Other advantages of the model
In addition to the advantages already mentioned, this model will enable AIReF to improve its position to assess the impact of measures such as those contained in the Recovery, Transformation and Resilience Plan (RTRP) and reforms related to the sustainability of the pension system. Furthermore, the model provides a tool to develop scenarios, which may be relevant for both policy impact and fiscal risk analysis.
Although this type of model has its limitations, it will enable AIReF’s analyses to be based on solid economic foundations, thereby strengthening its independence and technical capacity.
