STRESS Model

STRESS stands for Structural Reforms and Shadow Sector. It is a medium-scale dynamic general equilibrium model which can be solved by Matlab and Dynare, and was developed by four International Monetary Fund economists (Rahul Anand, Purva Khera, Magnus Saxegaard, and myself). Especially since the recent economic crisis, there has been a widespread debate on the macroeconomic impact of structural reforms. STRESS is an appropriate tool to examine the aggregate short- and long-run effects of labor and product market deregulation policies, in the presence of an informal economy. There is a special focus on reform packaging and sequencing.

Version #1 is available for India (here), and version #2 for South Africa (here). In addition, STRESS has been used in several Article IV consultations by Fund staff:

  • two selected issues papers on India in 2014 and 2017 (here and here);
  • a box in Peru's 2017 AIV report (here);
  • a selected issues paper on Argentina in 2017 (here);
  • and a selected issues paper on Colombia in 2018 (here).

Further, there are two works in progress on Peru and Morocco.

Additionally, training was provided on the STRESS model to International Monetary Fund staff.

A two-pager is available here (last updated on September 17, 2018).