The Budget Lab Small Macro Model (BLSMM)

This interactive, built around Budget Lab’s Small Macro Model (BLSMM, pronounced “blossom”), aims to help users explore the differences made by selected fiscal and macroeconomic assumptions. Model outputs are not Budget Lab forecasts!

Getting started: Configure your inputs in the left sidebar, either as a custom scenario or with one of the preset scenarios, and click 'Run Simulation' to see results. Charts compare Baseline (dashed) vs Scenario (solid). Rates and inflation are in percentage points and debt and deficits are shown as a percent of GDP. For budget charts, more positive values indicate larger deficits.

Intuitively, BLSMM take fiscal and monetary policy as inputs, along with other user-specified values like the paths of productivity growth and labor force participation, and delivers model-consistent paths for a variety of key outcomes. Those outcomes include real GDP; unemployment; inflation; 10-year Treasury rates; outlays, receipts, and debt; the primary and total budget deficits; the debt-to-GDP ratio; the average interest rate on federal debt; and the federal funds rate.

BLSMM generates an internally consistent economic and fiscal narrative that embodies key macroeconomic relationships. Those relationships are described in the technical documentation as well as in associated articles. The underlying model code is available here.

BLSMM was designed to be parsimonious, especially relative to the large macro models commonly used by Budget Lab and others. That has important virtues, chiefly those of simplicity and transparency. It is much easier to understand what is driving a given equilibrium response in BLSMM than in a larger model that functions to some extent as a black box. However, it also comes with downsides: some important macroeconomic dynamics are not captured by the current version of the model. The Budget Lab expects to reevaluate these limitations in the future, balancing them against the overall complexity of the model.

This is a preliminary and initial version, which Budget Lab expects to modify in response to user feedback. As such, output generated by the interactive should be regarded as illustrative demonstrations of stylized scenarios; they are not forecasts of The Budget Lab.

The Budget Lab Small Macro Model was developed by Ken Matheny and the interactive interface for that model was developed by Juan Carlos Gonzalez and Sylva Kroeber.