QUEST,the global macro-economic model of DG ECFIN
QUEST is the global macroeconomic model DG ECFIN uses for macroeconomic policy analysis and research. It is a structural macromodel in the New-Keynesian tradition with rigorous microeconomic foundations derived from utility and profit optimisation and including frictions in goods, labour and financial markets.
There are different versions of the QUEST model, estimated and calibrated, each used for specific purposes. Model variants have been estimated using Bayesian methods, jointly with colleagues at the Joint Research Centre of the European Commission. These dynamic stochastic general equilibrium (DSGE) models are used for shock analyses and shock decompositions, e.g. to assess the main drivers of growth and imbalances (Euro area, Germany, Spain, the US).
Larger multi-country calibrated model versions are used to address issues for which a deeper level of disaggregation is required, both at the regional and sector level. Many of the main applications deal with fiscal and monetary policy interactions and either use a one-sector model or models that explicitly distinguish tradables and nontradables sectors. Other model variants also include housing and collateral constraints, and a banking sector. All calibrated model versions are employed using different country disaggregations, focussing on the euro area or EU as a whole, and other global regions, or on individual member states.
For the analysis of structural reforms we use an extended version of the QUEST model that captures both investment in tangibles and intangibles (R&D), and disaggregates employment into three skill categories. In this model variant technological change is semi-endogenous, adopting the Jones (1995) knowledge production function, and this model is used to analyse the impact of structural reforms in the EU.