FINEX - A New Workhorse Model for Macroeconomic Forecasting and Policy Analysis
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Summary:
This paper presents a semi-structural macroeconomic model aimed at facilitating policy analysis and forecasting, primarily in countries with imperfect capital mobility and hybrid monetary policy regimes. Compared to earlier gap-trend projection models, the Forecasting Model of Internal and External Balance (FINEX) contains three main innovations: it accentuates external and internal balances; explicitly incorporates fiscal policy; and partly endogenizes the main trends. FINEX thus covers a broad set of policy instruments, including foreign exchange interventions (FXI), capital flow management measures (CFM), as well as common fiscal policy instruments. The model incorporates insights from the recent DSGE literature, while maintaining a more accessible gap-trend structure that lends itself to practical policy applications. While the paper refrains from drawing broad policy lessons, it emphasizes the model's ability to interpret recent data in terms of structural shocks and policy responses, thereby aiding policymakers in constructing coherent economic narratives and considering alternative scenarios.
Series:
Working Paper No. 2023/235
Subject:
Balance of payments Capital account Exchange rates Financial services Fiscal policy Foreign exchange Interest rate parity Public debt
Frequency:
regular
English
Publication Date:
November 10, 2023
ISBN/ISSN:
9798400259395/1018-5941
Stock No:
WPIEA2023235
Format:
Paper
Pages:
123
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