Macro Research for Development: An IMF-FCDO Collaboration—Topic 1: Modeling Policy Choices

The development of models for the analysis of economic policies in low-income countries (LICs) has been one of the key achievements of the FCDO-IMF research project. The use of analytical models particularly helps guide policy making in an unprecedent and uncertain situation like the current COVID-19 pandemic. The workhorse models are the Forecasting and Policy Analysis System ( FPAS ) and the Debt, Investment and Growth ( DIG ) model (plus an extension of the latter to include natural resources- DIGNAR ). The extensive use of these models by policymakers and IMF country teams suggests they have proven useful in illustrating the likely consequences of policy choices, particularly monetary policy and various fiscal policies. What follows is a brief description of how the topic on modeling policy choices has evolved over the four phases of the FCDO-IMF partnership on research on the macroeconomics of LICs.