Looking for tools to model an economy (like the US) and the effect of changes such as Fed Interest rate or inflation

Question

I am leaning toward a python solution and can work in a Win or Linux environment. I have looked into the area a bit and looked at some of the modelling efforts of the Federal Reserve and the "circular" models look potentially useful. If you have tools suggestions, it would be appreciated. I also believe in continuous education and would welcome suggestions for good texts on the topic and online classes such as Coursera.

Type of problems I would like to have the model clarify issues like this. CA Governor Newsom proposal to help with price spikes and excessive profit by gas producers: The proposal would authorize the California Energy Commission (CEC) to require that petroleum refiners maintain a minimum fuel reserve to avoid supply shortages that create higher prices for consumers.

Answer 1

Macroeconomics is a deep field, but the general model of the real economy is called the Dynamic Stochastic General Equilibrium (DSGE) model.

Some economists take a Bayesian approach and use Computable General Equilibrium (CGE) models, built on Social Accounting Matrices (SAMs). But, the frequentist approach, with a vector autoregression (VAR), is simpler and is accurate, even though it is less evidence-based. A VAR can be run in R by using the function

vars::VAR(data_table, p=3)

Then you can predict future time periods based on the coefficients.