Modeling and Policy Making

The construction and use of quantitative economic models is an important part of modern economic management since they constitute a powerful analytical tool capable of quantitative evaluation of determinants of behavior for economic agents, as well as assessing the impact of some fundamental economic variables known as economic and fiscal policy instruments on economic objectives as well as on economic and financial aggregates of national economies. The use of models has evolved since the second half of the twentieth century, driven by the emergence of Keynesian and neo-classical macroeconomic theories, as well as the intense spread of national statistics, as well as the amazing development in computing power. In addition, the post-World War II period was characterized by the proliferation of Keynesian macro-economic models based on the compilation of equations and the appreciation of their features with regression technology and then the use of simulation technology to evaluate policy alternatives and draw up different scenarios in all policy areas. Quantitative models can also be used in the projecting and future forecasting process, which is used in several areas such as demand assessment, foreign trade, and all economic aggregates. In addition to macroeconomic models, general equilibrium models based on microeconomics have been widely adopted, where parameters are defined by calibration and based on social matrix. These models are particularly used to assess international trade, environment, labor market, and income distribution or poverty issues. Besides, dynamic stochastic general equilibrium modeling is widely used given its ability to assess nominal and real shocks impacts to economies. 

API provides specialized institutional support in this area, particularly through the training programs "Modelling and economic policy design and analysis", "National accounting and social matrix skills" and "Surveying and analysis skills", as well as specialized institutional support to Arab countries in this area.