An Open Economy Quarterly Projection Model for Sri Lanka
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Summary:
This study documents a semi-structural model developed for Sri Lanka. This model, extended with a fiscal sector block, is expected to serve as a core forecasting model in the process of the Central Bank of Sri Lanka’s move towards flexible inflation targeting. The model includes a forward-looking endogenous interest rate and foreign exchange rate policy rules allowing for flexible change in policy behavior. It is a gap model that allows for simultaneous identification of business cycle position and long-term equilibrium. The model was first calibrated and then its data-fit was improved using Bayesian estimation technique with relatively tight priors.
Series:
Working Paper No. 2018/149
Subject:
Economic forecasting Exchange rates Foreign exchange Inflation Inflation targeting Monetary policy Output gap Prices Real exchange rates
English
Publication Date:
June 25, 2018
ISBN/ISSN:
9781484361511/1018-5941
Stock No:
WPIEA2018149
Pages:
59
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