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Welcome to the HERMIN web site!

A source covering information about macro- and micro-economic policy analysis, especially the EU Structural Policies. The HERMIN modelling framework nowadays covers all 27 member states of the EU. In addition macroregional models for East Germany and the Italian Mezzogiorno and regional models for Polish regions are available. The purpose of this website is to make all the HERMIN foundations and publications available and to act as a discussion platform for everyone interested into the analysis of structural policies.

The original HERMIN modelling framework grew out of the European Commission model HERMES in the late 1980s. It was specifically designed for use in the so-called “lagging” economies of the EU which received investment aid in the form of Structural Funds to promote catch-up with the more prosperous EU states

The original HERMIN modelling framework grew out of the European Commission model HERMES in the late 1980s. It was specifically designed for use in the so-called “lagging” economies of the EU which received investment aid in the form of Structural Funds to promote catch-up with the more prosperous EU states. The EU assisted investment programmes that were implemented in areas such as physical infrastructure, human capital and direct aid to enterprises were very difficult to analyse and needed new modelling approaches.  The HERMIN framework was designed to fill that gap.  In addition, it was designed to be used in situations where data were scarce and with the aim of retaining a common modelling framework that facilitated comparative analysis between different states.

HERMIN models were developed in the late 1980s to analyse the first Irish Structural Fund programme of 1989-1993.  Since then they have been extended to all of the cohesion states, as well as to some regions (e.g., Northern Ireland, East Germany, the Italian Mezzogiorno and to all of the 16 Polish NUTS II regions).  More recently it was extended to cover all 27 member states in order to study the spill over impacts of Structural Funds on the so-called “net donor” states who provide most of the finance to support cohesion policy.  Turkey, a joining state, is also included, and plans are in train to include Croatia and the other Western Balkan states.

Each HERMIN model has three broad components: a supply side; an absorption side; and an income distribution side.  A special characteristic of the standard version of the HERMIN model is that it disaggregates GDP into five production branches (manufacturing, building & construction, market services, agriculture and non-market (or public) services). In addition, it has a fairly standard disaggregation of the expenditure and income measures of GDP plus a detailed treatment of general government revenue and expenditure activities. 

A HERMIN country and regional model has many neoclassical features in the longer term.  More technically, such “neoclassical” features constitute what are called the “micro-foundations” of the macro structure of the model and are an essential feature of any model intended for use in policy analysis over a long time horizon.  Thus, output in manufacturing is not simply driven by demand.  It is also influenced by price and cost competitiveness, where firms seek out minimum cost locations for production.  In addition, factor demands in the manufacturing, market services and building & construction branches are derived on the assumption of cost minimization, using a CES production function constraint, where the capital/labour ratio is sensitive to relative factor prices.  The incorporation of a structural Phillips curve mechanism in the wage bargaining mechanism introduces further relative price effects.  Most importantly, the cohesion policy mechanisms operate through the supply side of the model, at least in the medium to long term. Conventional Keynesian mechanisms are incorporated into the short-term behaviour of a HERMIN model.  When subject to a demand shock, expenditure and income distribution sub-components generate Keynesian multiplier mechanisms.   Consequently, HERMIN can analyse the impacts of Structural Fund programmes both during implementation and after the programme is terminated when only the supply-side impacts are enduring. 

The site has five main aims. 

  • To introduce the main researchers and institutions who have worked on HERMIN over the years 
  • To provide updates on recent developments in HERMIN-related activities 
  • To act as a single, easily accessible source of downloadable papers and reports on the HERMIN research programme since it started in the late 1980s
  • To describe the range of commissioned projects where HERMIN has been directly or indirectly used 
  • To provide a point of contact to people who may wish to follow up any aspects of the HERMIN activities