QUEST
Source: Commission modelling inventory and knowledge management system (MIDAS)
Date of Report Generation: Mon Apr 22 2024
Dissemination: Public
© European Union, 2024
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Overview
Acronym
QUEST
Full title
Macroeconomic model QUEST
Main purpose
A macro-economic model used to analyse and understand the state of the EU economy.
Summary
QUEST is a macro-economic model (Dynamic Stochastic General Equilibrium) used to analyse and understand the state of the EU economy. It is developed by DG ECFIN, and estimated model variants have been developed jointly with support from the JRC. The first version of QUEST was applied in 2007, and many extensions have been developed since.
QUEST belongs to the class of New-Keynesian Dynamic Stochastic General Equilibrium (DSGE) models that are now widely used by international institutions and central banks. These models have rigorous microeconomic foundations derived from utility and profit optimisation and include frictions in goods, labour and financial markets. With empirically plausible estimation and calibration they are able to fit the main features of the macroeconomic time series. The QUEST model has been estimated on euro area and US data using Bayesian estimation methods. Calibrated model versions are used in wider applications.
QUEST supports questions related to policy formulation, implementation and evaluation. Many of the main applications deal with fiscal and monetary policy interactions. In order to deal with the wide range of policy issues in DG ECFIN, different model versions of the QUEST model have been constructed, each with a specific focus and regional and sectoral disaggregation.
Model categories
Economy
Model keywords
macroeconomic modelDSGE model
Model homepage
Ownership and Licence
Ownership
EU ownership (European Commission)
Ownership details
Licence type
Non-Free Software licence
The license has one or more of the following restrictions: it prohibits creation of derivative works; it prohibits commercial use; it obliges to share the licensed or derivative works on the same conditions.
Details
Structure and approach
QUEST III belongs to the class of New-Keynesian Dynamic Stochastic General Equilibrium (DSGE) models that are now widely used by international institutions and central banks. These models have rigorous microeconomic foundations derived from utility and profit optimisation and include frictions in goods, labour and financial markets. With empirically plausible estimation and calibration they are able to fit the main features of the macroeconomic time series. Calibrated model versions are used for most policy applications, but the QUEST III model has also been estimated on Euro Area, US and specific Euro Area countries (ES, DE) data using Bayesian estimation methods.
In order to deal with the wide range of policy issues in DG ECFIN, different model versions of the QUEST III model have been constructed, each with a specific focus and regional and sectoral disaggregation. Many of the main applications deal with fiscal and monetary policy interactions and either use a one-sector model or models that explicitly distinguish tradable and nontradable sectors, and include trade in intermediates. Other model variants also include housing and collateral constraints.
QUEST III has also been used for the analysis of structural reforms and another version has been employed for the analysis of energy and climate change policies. All these models are employed using different country disaggregations, focusing on the euro area or EU as a whole, and other global regions, or on individual member states.
The models are developed by the modelling unit in DG ECFIN. The Joint Research Centre of the European Commission supports QUEST development providing econometric, computational and methodological expertise in estimation and calibration, maintaining dedicated IT resources.
An update of some new developments of the QUEST III models was described in ECFIN Research Letter Vol.3.Issue 1/2009 (pp 10-13). For further references on the QUEST model, see the model homepage.
Input and parametrization
Key inputs for the estimated model versions are coming from national accounts and other macroeconomic data source. The main ones are:
- National account data (GDP and its components, current and constant prices)
- Labour market data (wages, employment)
- Financial variables (interest rates)
- Trade data
- Monetary data (interest rates)
Main output
Key outputs produced by the model:
- Model parameter estimates to be used for simulation (time evolution of all macro-variables of interest in response to a shock in the economy or changes in policy) and model-based policy analysis;
- Among the macroeconomic variables of interest, the model allows to study dynamics and economic drivers of:
- GDP and its components
- Price deflators
- Fiscal variables
- Employment, wages
- Interest rates
- Trade
Spatial & Temporal extent
The output has the following spatial-temporal resolution and extent:
Parameter | Description |
---|---|
Spatial extent / country coverage | EU Member states 27OECD countriesALL countries of the WORLD |
Global, incl. individual EU countries, various EU aggregates (EU, Euro area, OMS, NMS, etc). | |
Spatial resolution | World-regions (supranational)National |
Temporal extent | Short-term (from 1 to 5 years)Medium-term (5 to 15 years)Long-term (more than 15 years) |
Estimation data range: 1985-2013 for Euro area aggregate; 1995-2013 for individual countries. Simulation horizon: the model is simulated for several periods ahead to allow convergence. | |
Temporal resolution | Quarterly |
Quality & Transparency
Quality
Model uncertainties
Models are by definition affected by uncertainties (in input data, input parameters, scenario definitions, etc.). Have the model uncertainties been quantified? Are uncertainties accounted for in your simulations?
- response
- yes
- details
- Possible
- url
Sensitivity analysis
Sensitivity analysis helps identifying the uncertain inputs mostly responsible for the uncertainty in the model responses. Has the model undergone sensitivity analysis?
- response
- yes
- details
- Very often model versions are subject to sensitivity analysis.
- url
Have model results been published in peer-reviewed articles?
- response
- yes
- details
- There are many publications of the model in peer-reviewed journals.
- url
Has the model formally undergone scientific review by a panel of international experts?
Please note that this does not refer to the cases when model results were validated by stakeholders.
- response
- no
- details
- url
Model validation
Has model validation been done? Have model predictions been confronted with observed data (ex-post)?
- response
- yes
- details
- k-periods ahead behavior of the model variables is compared with historical observations.
- url
Transparency
To what extent do input data come from publicly available sources?
This may include sources accessible upon subscription and/or payment
- response
- Entirely based on publicly available sources
Is the full model database as such available to external users?
Whether or not it implies a specific procedure or a fee
- response
- no
- details
- Taken from public sources.
- url
Have model results been presented in publicly available reports?
Note this excludes IA reports.
- response
- yes
- details
- documents
For details please refer to the 'peer review for model validation' documents in the bibliographic references
Have output datasets been made publicly available?
Note this could also imply a specific procedure or a fee.
- response
- no
- details
- url
Is there any user friendly interface presenting model results that is accessible to the public?
For instance: Dashboard, interactive interfaces...
- response
- no
- details
- url
Has the model been documented in a publicly available dedicated report or a manual?
Note this excludes IA reports.
- response
- yes
- details
- Model structure is typically documented in scientific publications (e.g. Ratto et.al 2009, Burgert et al. 2020).
Is there a dedicated public website where information about the model is provided?
- response
- yes
Is the model code open-source?
- response
- no
- details
Can the code be accessed upon request?
- response
- no
- details
The model’s policy relevance and intended role in the policy cycle
The model is designed to contribute to the following policy areas
- Economy, finance and the euro
- Employment and social affairs
- Taxation
- Trade
The model is designed to contribute to the following phases of the policy cycle
- Anticipation – such as foresight and horizon scanning
- Evaluation – such as ex-post evaluation
- Formulation – such as ex-ante Impact Assessments
- Implementation – this also includes monitoring
The model’s potential
QUEST III is a tool suitable for policy preparation and implementation. It is designed to analyze economic issues like the occurrence boom-bust cycles, the study of structural reforms (Lisbon process), fiscal policy, country debt stabilization and sustainability. Main policy areas requiring QUEST based analysis concern MIP (Macroeconomic Imbalance Procedure) assessments, EDP (Excess Deficit) procedures and debt sustainability analysis.
DG ECFIN uses QUEST III for macroeconomic policy analysis and research. Results of the studies feed into ECFIN policy repots. JRC supports DG ECFIN for the development of QUEST III, focusing on the estimation. JRC provides estimated versions of QUEST models for individual member states, used to support policy studies for macro-economic surveillance by DG ECFIN
Previous use of the model in ex-ante impact assessments of the European Commission
Use of the model in ex-ante impact assessments since July 2017.
2024SWD/2024/63 final
Impact Assessment Report Part 1 Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Securing our future Europe's 2040 climate target and path to climate neutrality by 2050 building a sustainable, just and prosperous society
- Lead by
- CLIMA
- Run by
- European Commission
- Contribution role
- baseline and assessment of policy options
- Contribution details
E-QUEST (energy version of QUEST) has been used to complement the assessment of the macro-economic impacts of the energy and climate targets.
2021SWD/2021/641 final
Impact assessment accompanying the document Proposal for a Council Directive: restructuring the Union framework for the taxation of energy products and electricity (recast)
- Lead by
- TAXUD
- Run by
- European Commission
- Contribution role
- baseline and assessment of policy options
- Contribution details
The model helped to assess the following impacts:
- EU Exports & imports
- Investment flows & trade in services
- Free movement of goods, services, capital and workers
- Competition
- Innovation for productivity/resource efficiency
- Budgetary consequences for public authorities
- Consumer's ability to benefit from the internal market or to access goods and services from outside the EU
- Economic growth and employment
- Investments and functioning of markets
- Macro-economic stabilisation
- Impact on jobs
- Impact on jobs in specific sectors, professions, regions or countries
- Indirect effects on employment levels
- Emission of greenhouse gases
2020SWD/2020/245 final
Impact assessment accompanying the document Proposal for a Directive of the European Parliament and of the Council: on adequate minimum wages in the European Union
- Lead by
- EMPL
- Run by
- European Commission
- Contribution role
- baseline and assessment of policy options
- Contribution details
The model helped to assess the following impacts:
- Economic growth and employment
- Impact on jobs
- Wages, labour costs or wage setting mechanisms
- Inequalities and the distribution of incomes and wealth
2020SWD/2020/176 final
Impact Assessment accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Stepping up Europe’s 2030 climate ambition Investing in a climate-neutral future for the benefit of our people
- Lead by
- CLIMA
- Run by
- European Commission
- Contribution role
- baseline and assessment of policy options
- Contribution details
QUEST is used for macroeconomic assessment.
2018SWD/2018/307 final
Impact assessment accompanying the document Proposal for a Regulation of the European Parliament and the Council on: establishing Horizon Europe - the Framework Programme for Research and Innovation, laying down its rules for participation and dissemination and; Proposal for a Decision of the European Parliament and the Council on: establishing the specific programme implementing Horizon Europe - the Framework Programme for Research and Innovation and; Proposal for a Regulation of the European Parliament and the Council on: establishing the Research and Training Programme of the European Atomic Energy Community for the period 2021-2025 complementing Horizon Europe - the Framework Programme for Research and Innovation
- Lead by
- RTD
- Run by
- European Commission
- Contribution role
- baseline and assessment of policy options
- Contribution details
The model helped to assess the following impacts:
- Investment cycle
- Affects on individual Member States
- Stimulation of research and development
- Innovation for productivity/resource efficiency
- Economic growth and employment
2018SWD/2018/297 final
Impact assessment accompanying the document Proposal for a Regulation of the European Parliament and of the Council on: the establishment of a European Investment Stabilisation Function
- Lead by
- ECFIN
- Run by
- European Commission
- Contribution role
- baseline and assessment of policy options
- Contribution details
The model helped to assess the following impacts:
- Budgetary consequences for public authorities
- Economic growth and employment
- Macro-economic stabilisation
2018SWD/2018/282 final
Impact assessment accompanying the document Proposals for a Regulation of the European Parliament and of the Council on: the European Regional Development Fund and on the Cohesion Fund and; Proposal for a Regulation of the European Parliament and the Council on: a mechanism to resolve legal and administrative obstacles in a cross-border context and; Proposal for a Regulation of the European Parliament and the Council on: specific provisions for the European territorial cooperation goal (Interreg) supported by the European Regional Development Fund and external financing instruments
- Lead by
- REGIO
- Run by
- European Commission
- Contribution role
- baseline and assessment of policy options
- Contribution details
The model helped to assess the following impacts:
- Economic growth and employment
- Investment cycle
- Affects on individual Member States
- Stimulation of research and development
- Innovation for productivity/resource efficiency