Quarterly Projection Model Research Articles

МЕТОДИ АНАЛІЗУ ЧАСОВИХ РЯДІВ В КОНТЕКСТІ ПРОГНОЗУВАННЯ ВАЛЮТНОГО КУРСУ

The proposed article is devoted to forecasting the exchange rate using time series analysis methods. This study was conducted in 2 stages. At the first stage, the theoretical basis for forecasting the exchange rate based on the views of scientists of the post-Keynesian economic school was considered. Representatives of this school developed the Quarterly Projection Model, which is used for small open economies with a floating exchange rate and inflation targeting. In the Quarterly Projection Model, the factors affecting the formation of the exchange rate are considered. Such factors are GDP growth, the state of the balance of payments, NBU FX interventions, and the inflation rate. We separately investigated the impact of these factors on the exchange rate of the USD/UAH currency pair. For example, changes in GDP can directly affect the relative value of the hryvnia. The Key Policy Rate is a key instrument of the NBU's monetary policy. An increase in the Key Policy Rate can strengthen the hryvnia, while its decrease can lead to its weakening. Another factor affecting the exchange rate is the current account of the balance of payments. A small imbalance of this indicator (2–5% of GDP) is considered a standard phenomenon for many countries. An excessive current account deficit increases the risk of devaluation of the national currency. High inflation forces hryvnia holders to abandon it and switch to other liquid means of preserving real wealth, such as foreign currency. Therefore, a rather strong, rapid and constant increase in prices becomes the reason for a significant increase in the exchange rate. It is worth noting that the influence of these indicators occurs with a significant time lag. We used the Granger causality test to empirically analyze the causal relationships between the exchange rate and influencing factors. Empirical analysis has shown that the volume of NBU interventions, the balance of payments and the Key Policy Rate are significant and influential factors in the formation of the exchange rate in Ukraine. At the second stage, exchange rate forecasting was carried out using the vector autoregression (VAR) model. The application of the VAR model made it possible to investigate the complex interrelationships between economic indicators. Also, this model made it possible to take into account time lags and exogenous variables. The obtained results indicate the high adequacy of the vector autoregression (VAR) model in forecasting the exchange rate in the short- and medium-term planning periods.

An Extended Quarterly Projection Model for the Central Bank of Jordan

An Extended Quarterly Projection Model for the Central Bank of Jordan

A Quarterly Projection Model for the WAEMU

A Quarterly Projection Model for the WAEMU

An Extended Quarterly Projection Model: Credit Cycle, Macrofinancial Linkages and Macroprudential Measures: The Case of the Philippines

"Volume 2021 (2021): Issue 256 (Oct 2021): An Extended Quarterly Projection Model: Credit Cycle, Macrofinancial Linkages and Macroprudential Measures: The Case of the Philippines" published on 22 Oct 2021 by International Monetary Fund.

Forecasting Regional Indicators Based on the Quarterly Projection Model

The paper presents a semi-structural model of a regional economy based on the standard version of the neo-Keynesian model in gaps. The main feature of this tool is its ability to predict regional indicators and model the regional heterogeneity of the national economy. In our model, Russia is divided into two macro-regions: the Central Federal District and the rest of Russia in aggregate. These regions are modelled separately but are interrelated. The benefit of this approach is that it allows us to analyse how shocks in one region are passed along to others, how the regions react to general shocks and what the appropriate monetary policy response should be. The model represents a simple and convenient tool for building macroeconomically consistent forecasts and generating recommendations in the area of monetary policy based on regional specifics.

An Extended Quarterly Projection Model: Credit Cycle, Macrofinancial Linkages and Macroprudential Measures: The Case of the Philippines

An Extended Quarterly Projection Model: Credit Cycle, Macrofinancial Linkages and Macroprudential Measures: The Case of the Philippines

Quarterly Projection Model for the National Bank of Rwanda

National Bank of Rwanda (BNR) modernized monetary policy and transited to the price-based policy framework in January 2019. The Forecasting and Policy Analysis System (FPAS) is the cornerstone for the new forward-looking framework, which mobilizes and organizes resources and sets processes for regular forecasting rounds. The core of this system is a structural macroeconomic model for macroeconomic analysis and projections to support the BNR staff’s policy recommendations to the monetary policy committee. This paper documents the quarterly projection model (QPM) at the core of the FPAS at the BNR. The model is an extension of the canonical structure in Berg et al (2006) to reflect specifics of the interest-rate-based policy framework with a managed exchange rate, the effect of agricultural sector and harvests on prices, and the role of fiscal policies and aid flows.

Quarterly Projection Model for the National Bank of Rwanda

National Bank of Rwanda (BNR) modernized monetary policy and transited to the price-based policy framework in January 2019. The Forecasting and Policy Analysis System (FPAS) is the cornerstone for the new forward-looking framework, which mobilizes and organizes resources and sets processes for regular forecasting rounds. The core of this system is a structural macroeconomic model for macroeconomic analysis and projections to support the BNR staff’s policy recommendations to the monetary policy committee. This paper documents the quarterly projection model (QPM) at the core of the FPAS at the BNR. The model is an extension of the canonical structure in Berg et al (2006) to reflect specifics of the interest-rate-based policy framework with a managed exchange rate, the effect of agricultural sector and harvests on prices, and the role of fiscal policies and aid flows.

Estimating the Neutral Interest Rate in the Kyrgyz Republic

This paper estimates the neutral interest rate in the Kyrgyz Republic using a range of methodologies. Results indicate that the real neutral rate is about 4 percent based on an average of models and 3.7 percent based on a Quarterly Projection Model. This is higher than in many emerging markets and is likely explained by higher public debt and an elevated risk premium, low creditor rights and contractual enforcement, and low domestic savings. The use of an estimate of the neutral interest rate provides useful guidance to monetary policy and enhances transparency and independence of the central bank. Our estimate provides a quantitative benchmark for the monetary policy stance in the context of a central bank that is building analytical capacity, integrating additional insights in its decision-making process, and working to improve its communication. Strengthening the monetary transmission mechanism will be critical to enhance the effectiveness of monetary policy, including by allowing more exchange rate flexibility to support the transition to a full-fledged inflation targeting regime, and reducing excess liquidity to enhance the credit channel, reducing dollarization and high interest rate spreads that adversely affect the transmission of the policy rate to the economy.

Republic of Belarus

The National Bank of the Republic of Belarus (NBRB) is reforming its monetary policy framework in line with recommendations of past IMF TA missions and its Road Map for Transitioning to Inflation Targeting with the aim of eventually adopting inflation targeting (IT). Transitioning to IT would require, among other measures and reforms, strengthening the monetary policy forecasting and analysis system (FPAS) and better integrating the core quarterly projection model (QPM) into the decision-making process. This TA mission was the fifth from series of quarterly IMF TA missions focused on the FPAS capacity building. It was mainly aimed to simulate initial conditions and compile a QPM-based forecast scenario as a part of a practical forecasting round at the NBRB in March. Moreover, the mission worked with the modeling team to deepen its understanding of the QPM’s role in policy decision making and in internal communication.

Republic of Belarus

The National Bank of the Republic of Belarus (NBRB) is reforming its monetary policy framework in line with recommendations of past IMF TA missions and its Road Map for Transitioning to Inflation Targeting with the aim of eventually adopting inflation targeting (IT). Transitioning to IT would require, among other strengthening the monetary policy forecasting and analysis system (FPAS) and better integrating the core quarterly projection model (QPM) into the decision-making process. This mission was the seventh in a planned series of quarterly FPAS TA missions. It was mainly aimed at helping with reviewing the initial conditions and compiling a QPM-based forecast as a part of the NBRB’s September forecasting round. The mission, in addition, worked on strengthening processes within the FPAS.

Quarterly Projection Model for the National Bank of Rwanda

National Bank of Rwanda (BNR) modernized monetary policy and transited to the price-based policy framework in January 2019. The Forecasting and Policy Analysis System (FPAS) is the cornerstone for the new forward-looking framework, which mobilizes and organizes resources and sets processes for regular forecasting rounds. The core of this system is a structural macroeconomic model for macroeconomic analysis and projections to support the BNR staff's policy recommendations to the monetary policy committee. This paper documents the quarterly projection model (QPM) at the core of the FPAS at the BNR. The model is an extension of the canonical structure in Berg et al (2006) to reflect specifics of the interest-rate-based policy framework with a managed exchange rate, the effect of agricultural sector and harvests on prices, and the role of fiscal policies and aid flows.

Estimating the Neutral Interest Rate in the Kyrgyz Republic

This paper estimates the neutral interest rate in the Kyrgyz Republic using a range of methodologies. Results indicate that the real neutral rate is about 4 percent based on an average of models and 3.7 percent based on a Quarterly Projection Model. This is higher than in many emerging markets and is likely explained by higher public debt and an elevated risk premium, low creditor rights and contractual enforcement, and low domestic savings. The use of an estimate of the neutral interest rate provides useful guidance to monetary policy and enhances transparency and independence of the central bank. Our estimate provides a quantitative benchmark for the monetary policy stance in the context of a central bank that is building analytical capacity, integrating additional insights in its decision-making process, and working to improve its communication. Strengthening the monetary transmission mechanism will be critical to enhance the effectiveness of monetary policy, including by allowing more exchange rate flexibility to support the transition to a full-fledged inflation targeting regime, and reducing excess liquidity to enhance the credit channel, reducing dollarization and high interest rate spreads that adversely affect the transmission of the policy rate to the economy.

Morocco: A Practical Approach to Monetary Policy Analysis in a Country with Capital Controls

The Central Bank of Morocco has been working on developing a Forecasting and Policy Analysis System (FPAS) to support a gradual move toward a more flexible exchange rate regime and the eventual adoption of a full-fledged inflation-targeting (IT) regime. At the center of the FPAS is a quarterly projection model that was tailored for two different types of exchange rate regimes. Presently, the fixed exchange rate model version is to be used during the pre-IT period, while the flexible exchange rate model version is to be used to prepare alternative scenarios for monetary policy decision makers to discuss the potential policy implications of shocks under an IT regime.

Structural Quarterly Projection Model for Belarus

Belarusian authorities contemplate transiting to inflation targeting. The paper suggests a small structural model at the core of the forecasting and policy analysis system. A well-researched canonical structure of Berg, A., Karam, P. and D. Laxton (2006) is extended to capture specifics of Belarusian economy and macroeconomic policy. The modified model's policy block reflects a monetary targeting regime and allows for transition from it to an interest-rate-based framework. Adding wages, directed lending and dollarization allow for studying implications of activist wage policy, state program lending, and dollarization for macroeconomic stability and the strength of the policy transmission mechanism.

Structural Quarterly Projection Model for Belarus

Belarusian authorities contemplate transiting to inflation targeting. The paper suggests a small structural model at the core of the forecasting and policy analysis system. A well-researched canonical structure of Berg, A., Karam, P. and D. Laxton (2006) is extended to capture specifics of Belarusian economy and macroeconomic policy. The modified model’s policy block reflects a monetary targeting regime and allows for transition from it to an interest-rate-based framework. Adding wages, directed lending and dollarization allow for studying implications of activist wage policy, state program lending, and dollarization for macroeconomic stability and the strength of the policy transmission mechanism.

Quarterly Projection Model for India: Key Elements and Properties

This paper outlines the key features of the production version of the quarterly projection model (QPM), which is a forward-looking open-economy gap model, calibrated to represent the Indian case, for generating forecasts and risk assessment as well as conducting policy analysis. QPM incorporates several India-specific features like the importance of the agricultural sector and food prices in the inflation process; features of monetary policy transmission and implications of an endogenous credibility process for monetary policy formulation. The paper also describes key properties and historical decompositions of some important macroeconomic variables.

Quarterly Projection Model for India: Key Elements and Properties

This paper outlines the key features of the production version of the quarterly projection model (QPM), which is a forward-looking open-economy gap model, calibrated to represent the Indian case, for generating forecasts and risk assessment as well as conducting policy analysis. QPM incorporates several India-specific features like the importance of the agricultural sector and food prices in the inflation process; features of monetary policy transmission and implications of an endogenous credibility process for monetary policy formulation. The paper also describes key properties and historical decompositions of some important macroeconomic variables.

Inflation-Forecast Targeting for India: An Outline of the Analytical Framework

India formally adopted flexible inflation targeting (FIT) in June 2016 to place price stability, defined in terms of a target CPI inflation, as the primary objective of monetary policy. In this context, the paper draws on Indian macroeconomic developments since 2000 and the experience of other countries that adopted FIT to bring out insights on how credible policy with an emphasis on a strong nominal anchor can reduce the impact of supply shocks and improve macroeconomic stability. For illustrating the key issues given the unique structural characteristics of India and the policy options under an FIT framework, the paper describes an analytical framework using the core quarterly projection model (QPM). Simulations of the QPM are carried out to illustrate the monetary policy responses under different types of uncertainty and to bring out the importance of gaining credibility for improving monetary policy efficacy.

Inflation-Forecast Targeting for India: An Outline of the Analytical Framework

India formally adopted flexible inflation targeting (FIT) in June 2016 to place price stability, defined in terms of a target CPI inflation, as the primary objective of monetary policy. In this context, the paper draws on Indian macroeconomic developments since 2000 and the experience of other countries that adopted FIT to bring out insights on how credible policy with an emphasis on a strong nominal anchor can reduce the impact of supply shocks and improve macroeconomic stability. For illustrating the key issues given the unique structural characteristics of India and the policy options under an FIT framework, the paper describes an analytical framework using the core quarterly projection model (QPM). Simulations of the QPM are carried out to illustrate the monetary policy responses under different types of uncertainty and to bring out the importance of gaining credibility for improving monetary policy efficacy.