The Congressional Budget Office’s Small-Scale Policy Model: Working Paper 2022-08
CBO's small-scale policy model determines in one model the short-run demand-driven responses and long-run supply-driven responses to policy changes. It also makes short- and long-run responses depend on the fiscal policy under study.
The Congressional Budget Office’s small-scale policy model (CBOSS) combines features of two existing models used to analyze fiscal policy into a single workhorse model. Currently, the multipliers model focuses on short-term demand effects, whereas the policy growth model focuses on long-run equilibrium effects. Unlike the two-model approach, CBOSS passes short-run effects through to the long run. CBOSS uses interest rates as a transmission mechanism for the “crowding out” of investment. The model also consistently treats the effects of policy in both the short and long run.