Macro Models and Poverty Analysis: Theoretical Tensions and Empirical Practice

This article reviews economy-wide, multisectoral models and the issues involved when using them to analyse macro-poverty linkages in developing countries. It explores the theoretical underpinnings for simple SAM multiplier models, real-economy CGE models, and real-financial CGE models. The latter represent an 'eclectic' approach, which strives to build models that integrate elements from CGE and macro-financial models, the alternative, more applied, 'ecumenical' approach being to keep these models separate but specify ways through which they can communicate. Due to limited knowledge about the data and processes, the ability of analysts to address short-run distributional issues is limited; we therefore expect most progress in the analysis of medium- and long-run issues, using both eclectic and ecumenical approaches. Copyright Overseas Development Institute, 2005.