EUROMON: The multi-country model of De Nederlandsche Bank

This Occasional Study wraps up the modelling work that has been done in recent years regarding DNB’s multi-country model EUROMON. It offers a description of the current version of the model and provides information about its simulation properties through the analysis of variety of standard scenarios. EUROMON is an estimated multi-country model. The current version includes 13 individual country models plus a trade block providing the international linkages between these countries. The 13 countries are the EMU-participants Germany, France, Italy, Spain, the Netherlands, Belgium, Austria and Finland, the EU-countries of the United Kingdom, Sweden and Denmark, plus the United States and Japan. The country models all share the same basic structure. Differences mainly relate to distinct values of model parameters and speeds of adjustment, and in some cases to slightly different specifications of equations in order to allow for specific institutional features of individual countries. EUROMON is a neo-Keynesian model in spirit, combining a vertical supply curve in the long run with an important role for demand factors in the short-run determination of output. The model incorporates a wage bargaining framework which makes the long-run supply curve dependent on real factors, such as tax policies. EUROMON is an aggregate model, with no further breakdown in sectors or categories of goods and services. The current version of the model is backward-looking. The study concludes by addressing the main shortcomings and strong features of the model that require further attention.