EU Science Hub

The RHOMOLO model

RHOMOLO is the spatial computable general equilibrium model of the European Commission focusing on EU regions. It has been developed and maintained by the regional economic modelling team at the Directorate-General Joint Research Centre (DG JRC) in cooperation with Directorate-General for Regional and Urban Policy (DG REGIO). It is used for policy impact assessment and provides sector-, region- and time-specific simulations to support to EU policy making on investments and reforms covering a wide array of policies.

RHOMOLO (v2) covers all EU regions, disaggregating their economies into NACE rev.2 sectors, entailing a constant effort on data updating and maintenance. All the monetary transactions in the economy are included in the model as results of agents making optimising decision. Goods and services are consumed by households, government and firms, and are produced in markets that can be perfectly or imperfectly competitive. Spatial interactions between regions are captured through costly trade matrices of goods and services, factor mobility through migration and investments, and knowledge spill-overs. This makes RHOMOLO particularly well suited for analysing policies related to investments in human capital, transport infrastructure and innovation.

RHOMOLO is built following the same micro-founded general equilibrium approach as the national DSGE model QUEST, developed by the Directorate-General for Economic and Financial Affairs (DG ECFIN), and is often used in combination with it to provide a breakdown of results by region and sector, taking duly into account the specificities of each model.

A web tool has been developed which allows users to execute a set of policy experiments using a simplified version of the model.