Expanding Country Models in NiGEM

Main points

• Eagle-eyed followers of the National Institute may have noticed that our NiGEM model has recently seen the introduction of several new country models. NiGEM is an integral component of our global forecast, and in our most recent forecast rounds expanded country models have been added for Malaysia, Romania, and South Africa. This box explores why we expand the model, the process we use to do so, and some of the common difficulties that arise when we do and how we overcome them.
• When modelling countries in NiGEM, we have three options. We can leave them as a part of an aggregated regional bloc, as is the case with Africa, South America, and the Middle East. We can have a reduced-country model, such as for Norway, Hong Kong, or Mexico, for example. Or we can have a full-country model, such as for Germany, the United States of America, or Japan. Most OECD countries have full-country models, and many now also include an additional banking sector, designed to model shocks in banking regulation.
• We use NiGEM to create global forecasts, run simulations, and create counterfactual scenarios. NiGEM also plays a large role in the climate world, as we work with the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) to provide macro-economic inputs into climate simulations. Capturing economic complexities in our model is crucial, and the work to expand country models is necessary to support this.