Uncertainty in the global environment is having unexpected spillovers into domestic economies, all which makes policy-making for inclusive growth, quite challenging. The fall in commodity price, particularly oil and various metals, has exposed many countries to difficult policy choices.
At the same time there is need to make sure policy-making is grounded on the microstructure of the economy, in ways that will enable structural transformation of the economy in the long run.
All this calls for policy-making tools that are able to combine the global environment, the local environment, the microstructure of the economy and the macro-picture of the economy, all within a long-term framework.
The Dynamic Stochastic General Equilibrium Models (DSGE) have all these features. The DSGE models capture the various strands of inclusive growth and structural transformation, but focusing on job creation, wage structure, manufacturing activities and value addition, global trade, fiscal constrains for governments, external borrowing by countries, and government savings through sovereign wealth funds, among other aspects.
For more information click the link below: