The Inforum International System of Models - A Brief Overview
In order to analyze the global economic impact of various shocks (economic and non-economic), one must use a consistent and empirical economic framework rooted in sound economic theory and reliable economic data. Inforum pioneered such an infrastructure through its International System (IS) of IM models of key national economies.
This collection of models has been built over the past three decades by a network of international researchers applying a framework and philosophy first pioneered by Professor Clopper Almon at Inforum. The system currently includes models of Austria, Belgium, Canada, China, France, Germany, Italy, Japan, Mexico, South Korea, Spain, the United Kingdom, and the United States. The models are tied together through a Bilateral Trade Model (BTM) that describes bilateral merchandise trade flows among countries for 120 commodities.
For a more comprehensive listing of Inforum's international partners, click here. The Inforum system incorporates several important features that make it an ideal tool to provide quantitative analyses on how the changing global environment is impacting not only individual economies, but specific industries as well. These features include:
National economies are modeled from the bottom-up.
While each model has an explicit accounting for macroeconomic quantities such as GDP, inflation and unemployment, the approach to determining these quantities is unique. Combining a classical input-output formulation with extensive use of regression analysis, the models employ a "bottom-up" approach to macroeconomic modeling. For example, aggregate consumption, total exports, and employment are not determined directly, but are computed as the sum of their parts: consumption of specific goods and services, exports by commodity, and employment by industry.
The national models reflect specific country structures and institutions.
Though the Inforum models share a common structure, they are not simple applications of a general model form. At the most fundamental level, each model is based on the economic data of its subject country, including the interindustry structure indicated by country-specific input-output tables. Moreover, the models incorporate economic characteristics and econometrically-estimated behavior specific to each country. The model of China reflects the institutions that are in place today and projects how those institutions might change over time. Likewise, the US model assumes US institutions and economic structures. Thus, each model will react to global economic shocks in different ways.
Scenario modeling capability is extensive and flexible.
The Inforum models possess a flexible structure for performing alternative scenarios. Exogenous assumptions can be easily modified, and endogenous variables or equation structure can be altered at the industry-level. For example, the system was successfully used to conduct an ambitious analysis of European Integration that required more than a dozen sector-specific studies. Issues analyzed included the removal of customs stations, changes in the structure of retail banking, the decline of costs in trucking, and the reduction of management "x-inefficiencies" due to the increase of competition in key sectors.
The national models are linked via a bilateral trade model.
The Inforum models are connected by the detailed Bilateral Trade Model (BTM). As the name implies, BTM models the bilateral flows of merchandise trade from one country to another for 120 categories of tradable goods. For each country and commodity, the model predicts the share of imports sourced in each of the other 13 countries plus two regions (Rest of Europe and Rest of World). These shares are projected as a function of the relative prices among competing exporters and each exporter's capacity to export. Thus, for example, an increase in the capital stock of the automobile industry in South Korea will lead, over time, to an increase Korea's share in the imports of other countries' auto imports. A detailed description of the BTM can be found here.
A more detailed description of the International System of Models is available here.