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FIDELIO 3 manual: Equations and data sources

Abstract: 
FIDELIO (Fully Interregional Dynamic Econometric Long-term Input-Output) is a multi-sectoral model developed by the unit B.5 of the Directorate General Joint Research Centre (JRC) — the circular economy and industrial leadership unit. Compared to neoclassical CGE models — which assume that the perfect flexibility of prices and quantities ensures the full use of the factors of production at all times — FIDELIO integrates some new-Keynesian features: consumption adjusts slowly to its optimal level according to an error correction model and wages do not clear the labour market. The assumptions that prices do not clear the markets and market "imperfections" exist generate the dynamics of the model that is solved sequentially (recursive dynamic). In addition, FIDELIO is an econometric model since the calibration of most of the behavioural parameters of the model (dynamic adjustment lags of prices and quantities, and elasticities) is based on econometric estimations. This technical report illustrates the third version of the FIDELIO model, FIDELIO 3. The changes introduced in the subsequent versions of the model have two main objectives. The first one is to increase the coverage of the model. The second one is to improve the efficiency and the capacity of the model to evaluate sustainable production and consumption policies. The aim of this report is twofold. First, it contains all the equations of the current version of the model; second, it illustrates the characteristics of the data used by FIDELIO 3.