The Global Macrofinancial Model

This paper documents the theoretical structure and empirical properties of the latestversion of the Global Macrofinancial Model (GFM). This dynamic stochastic generalequilibrium model of the world economy, disaggregated into forty national economies,was developed to support multilaterally consistent macrofinancial policy, risk andspillover analysis. It features a range of nominal and real rigidities, extensivemacrofinancial linkages, and diverse spillover transmission channels. Thesemacrofinancial linkages encompass bank and capital market based financialintermediation, with financial accelerator mechanisms linked to the values of the housingand physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis,macroprudential policy analysis, spillover analysis, and forecasting applications of theGFM are demonstrated. These include quantifying the monetary, fiscal andmacroprudential policy transmission mechanisms, accounting for business cyclefluctuations, and generating relatively accurate forecasts of inflation and output growth