Target Fitting and Robustness Analysis in CGE Models

This paper proposes a methodology to integrate econometric models with Johansen-type computable general equilibrium (CGE) models in instances when it is necessary to generate results consistent with a subset of variables that are endogenous to both models. Results for a subset of the CGE endogenous variables are generated from econometric models, and set as targets to be replicated by the CGE model. The methodology is further extended for robustness testing of the outcomes in cases which the targeted scenarios are random. The proposed methodology is illustrated by simulating the impacts of a monetary shock in Brazil.