The BIS multisector model: a multi-country environment for macroeconomic analysis
Summary
Focus
We introduce the BIS Multisector Model (BIS-MS), a macroeconomic model featuring a detailed production network, designed to analyse economic dynamics and monetary policy reactions for a large set of countries. The model can be calibrated to replicate the input-output structure of more than 80 advanced and emerging and developing economies, enabling a detailed exploration of sectoral interdependencies and cross-industry shock transmission. A ready-to-use toolbox facilitates the exploration of cross-country transmission mechanisms and the assessment of alternative policy strategies.
Contribution
The BIS-MS model builds on the foundations of medium-scale dynamic stochastic general equilibrium (DSGE) models and extends them in two key dimensions. First, it incorporates a detailed multisector structure. Second, it features a multi-country framework. These two characteristics set the BIS-MS model apart from other models typically used for policy analysis, making it well suited for studying long-run structural change, transitory sectoral shocks and cross-country differences in the transmission of these developments.
Findings
To demonstrate the model's capabilities, we use it to study temporary and structural shifts in energy prices under alternative monetary policy strategies across a selected group of countries. These exercises highlight the critical role of production networks in the transmission of energy price shocks. By comparing responses across alternative monetary strategies for a broad set of countries, we illustrate the factors influencing the inflation–output trade-off under different policy rules. Our findings underscore the pivotal role of monetary policy design in shaping the macroeconomic and sectoral impacts of energy price fluctuations.
Abstract
This paper introduces the BIS Multisector Model (BIS-MS), a dynamic stochastic general equilibrium (DSGE) model for analyzing macroeconomic dynamics in a multi-sector production network. The model can be calibrated to match the input-output data of more than 80 economies, enabling a detailed exploration of sectoral interdependencies and cross-industry shock transmission. By incorporating nominal rigidities at the sectoral level, the model can also be used to evaluate alternative monetary policy strategies. The paper demonstrates the model's capabilities by analyzing temporary and permanent energy price shocks under different monetary policy frameworks. In doing so, it illustrates the critical role of the country-specific production networks in shaping macroeconomic outcomes. The accompanying model toolbox equips policymakers and researchers with an easy-to-access platform for flexible scenario analysis.
JEL classification: C54, E52, H23, Q43
Keywords: multisector model, DSGE model, monetary policy, production network, climate change
