Name: GMMET (Global Macroeconomic Model for the Energy Transition)
Type: DGE
Institution: IMF
Documentation: IMF working paper
Geographic coverage: Global
Description: The model is a multi-sector, multi-region dynamic macroeconomic model aimed at mapping mitigation policies to emissions reduction and to macroeconomic and sectoral variables covering the real, external, fiscal, and monetary sectors of the economy.
Questions to be answered/variables considered: The model can inform the trade-off between growth-friendly mitigation policies (focused on subsidies) and debt sustainability (focused on greenhouse gas tax), investigate the impact on the external sector from decarbonization depending on country-specific international specialization, or assess inflation dynamics and monetary policy response in different regimes. It may also put into perspective mitigation policies with other structural policies (labor policies, tax reform).
Strengths: The model balances sectoral granularity needed to discuss sector-specific policies with a macroeconomic framework needed to discuss structural, fiscal, and monetary policies.
Limitations: The redistributive implications (inequalities) and details of the labor market analysis are not covered specifically, and climate damage and resilience policies are beyond the scope of the model.
Assumptions: The main model results (impact of mitigation policies on growth, inflation, fiscal balance) depend on key elasticities for which the range of estimates is large, such as the substitutability (1) between energy and capital and (2) between technologies or energies at the sectoral level.
Use:
- The documentation of the model is publicly available, and sharing of procedures with central banks and Ministries of Finance is envisioned.
- A two-country (individual country plus rest of world) version of the model exists and is particularly suitable for assessing the macroeconomic impact of different domestic decarbonization strategies for forecasting or public finance management.
- The model has been used to assess the impact of the U.S. Inflation Reduction Act on domestic and global greenhouse gas emissions, inflation, growth, public revenues, and expenditures. An application for the Dominican Republic focuses on a reform of the energy sector and its implications for the economy.
Development: The model is under continuous development. The modeling team is exploring the international specialization of transition commodities (such as metals) and goods (such as electric vehicles and solar panels) and is working on two aspects of the modeling infrastructure: (1) streamlining and simplifying the model’s calibration to enhance usability, and (2) improving the reporting of model results.