Economic Analysis Series No.139
The EPA World Economic Model 5th Version
- Basic Structure and Multipliers -

May, 1995
  • (ERI, EPA)
    • Katsuhiko Masubuchi
    • Yoshio Wakabayashi
    • Reiko Imai
    • Yuichi Takayama
    • Kazuya Kishibuchi
    • Yoshiki Yamaguchi
    • Hiroyuki Tamada
    • Yoshihito Urashima
    • Kazutaka Noma
    • Yasuhiro Kurachi
    • Hiroshi Yamaoka
    • Toshiyuki Suzuki
    • Hirofumi Nishu

The full text is written in Japanese.


The EPA World Economic Model is a quarterly-based econometric model that has been developed in the Economic Research Institute of EPA in order to analyse interdependency of the world economy, and to estimate the own and cross-country effects of fiscal and monetary policies. The Economic Research Institute started developing the model in 1979, and the 1st version was made in 1982. Since then, the model has been revised once a few years. The purpose of this paper is to explain structure of the newly revised, the 5th version of the model and the results of policy simulations.

The EPA World Economic Model is basically a demand-oriented, Keynesian type model with an IS-LM-BP framework, and is made up of the following sub-models :

  1. 3 medium-sized country models of the United States, Japan and Germany;
  2. 6 small-sized country models of France, the United Kingdom, Italy, Canada, Australia and Korea ;
  3. 6 regional models (Asia excluding Japan and Korea, Western Europe excluding the above 4 European countries, Latin America, Middle East, Former Soviet Union and Eastern Europe, the Rest of the World); and
  4. a trade-linkage model.

One of the properties of the results of policy simulations of the 5th version compared with the previous one is that the effect of government investments on GDP in Japan, as well as that of income-tax reduction, has declined a little. It is mainly because crowding-out effect brought by the rise of interest rates and propensity to import of manufactured goods have increased.

Chart = Effects of Fiscal Policies in Japan on Nominal GDP
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