What is E3ME?

E3ME is a macro-econometric model designed to assess global policy challenges. It is the most advanced econometric model in the world and is widely used for policy assessment, forecasting and research purposes. The model is owned and maintained by Cambridge Econometrics.

What policy areas does it cover?

E3ME is a macroeconomic model that integrates a range of social and environmental processes. The two-way linkages between the economy, wider society and the environment are a key feature of the model. E3ME is designed to address national and global economic and economy-environment policy challenges but can be applied to other policy areas due to its in-built adaptability. The model has been used in policy areas as diverse as climate change, gender equality and Brexit.

How does E3ME differ from other macro-econometric models?

E3ME differs from most mainstream models in that it provides a strong empirical basis for analysis.

It can fully assess both short and long-term impacts and is not limited by many of the restrictive assumptions common to Computable General Equilibrium (CGE) models.

E3ME does not assume optimising behaviour and full utilisation of resources. It therefore includes real-world features such as involuntary unemployment.

The depiction of the financial sector in E3ME (including ‘endogenous money’) is now recognised by central banks as an accurate representation.

A core feature of the model is its treatment of technology, which will be key to meeting many of the policy challenges the model is used to assess. The FTT models of technology diffusion provide a representation of the adoption of new technologies.

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