ANNEX A Brief Note on the Gem
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Prepared by Ivan Tchakarov.
A brief note on the GEM is provided in the appendix.
For example, since the model is based on a single representative consumer, it can not be used to address issues of income distribution.
For example, it is not easy to split output into traded and nontraded goods or to determine the role of commodities and semifinished goods in production.
This uses the concept of the financial accelerator developed by Bernanke, Gertler, and Gilchrist (1999).
The assumption that half of the increase in the foreign interest rate is transmitted to the domestic interest rate may overstate the impact of US monetary policy on Thai monetary policy under the inflation targeting framework with floating exchange rate system.
To enhance the data coherence of the model’s parameter values, the IMF’s Research Department is working on Bayesian methods to estimate GEM parameters, extending the approach applied in Smets and Wouters (2003), and Del Negro and Schorfheide (2004). A smaller model with the financial accelerator has been estimated by Elekdag, Justiniano, and Tchakarov (2005).