The World Bank Revised Minimum Standard Model: Concepts and limitations

Abstract

The Revised Minimum Standard Model RMSM became an important analytical tool for the World Bank’s financing projects in the 1970s. Since that time, the model and its sequential extensions the RMSM-X and the RMSM-XX have been used to forecast economic growth and development in developing countries, despite their numerous limitations.
The RMSM model can be solved in the positive mode and in the programming mode without or with limits on foreign flows. The model estimates the levels of investment and foreign financing that are needed to achieve a target for economic growth if it is solved in the positive mode or in the programming mode without constrains on foreign financing. If the RMSM model is solved in the programming mode with constrains on foreign financing then it gives us a feasible level of output growth for available levels of investment and foreign financing.
The extended Bank’s models incorporate more complex economic structure. The RMSM-XX model more completely specifies the behavioural links among economic variables.