European Central Bank publishes working paper introducing the ECB Multi-Country Model as the core framework for staff projections

The European Central Bank published a Working Paper introducing the ECB Multi-Country Model (ECB‑MC), a semi-structural macroeconomic model used for economic forecasting and policy analysis within the Eurosystem. The framework models Germany, France, Italy, Spain and the Netherlands and serves as the main reference for the ECB’s staff macroeconomic projections, supporting scenario, risk and sensitivity analysis and the assessment of shock transmission channels. ECB‑MC covers economies accounting for more than 80% of euro area GDP and replaced the previous multi-country model (NMCM). The paper describes the model’s structure, estimation and operational use, with country blocks spanning domestic demand, foreign trade, supply, wages and prices (via the WAPRO block) and a financial sector block that includes country-specific risk premia, alongside an extensive fiscal block. It also sets out how the model is applied in the projection process, including the conditioning on technical assumptions and the incorporation and tracking of expert judgement through add-factoring routines, and reports “basic model elasticities” to standardised shocks used for cross-model consistency in projection work. A linked multi-country version that endogenously exploits trade linkages and the fiscal block is described as the subject of forthcoming papers, which will further illustrate the model’s properties and shock propagation in the full setup.