A Quarterly Projection Model for the WAEMU
IMF Working Papers, October 28, 2022
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Bibliographic details
- Authors: Carlos de Resende, Alsim Fall, Demba Sy
- Published: October 28, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400225864.001
Model structure and key features
- Semi-structural New-Keynesian Quarterly Projection Model (QPM) adapted for the WAEMU zone.
- Adjustments to the canonical QPM to capture:
- The fixed exchange rate regime.
- Relatively tight capital controls.
- The ability of the central bank (Banque Centrale des États de l’Afrique de l’Ouest, BCEAO) to exert some influence on domestic money markets and interest rates.
- An implicit foreign exchange reserve target within the BCEAO monetary policy framework.
Parametrization and estimation
- The model is parametrized through a mix of calibration and Bayesian estimation techniques.
Dynamic properties and validation
- The model displays dynamic properties for the main variables in response to various shocks that are in line with theoretical priors and empirical evidence.
- Moments computed from artificial data generated with the model match well those observed in the data.
Forecasting and scenario analysis
- Medium-term forecasts that consider the Covid-19 pandemic produce sensible results when compared with forecasts produced by a standard VAR.
Analytical uses and policy relevance
- The model displays desirable analytical properties and sensible data-matching and forecasting capabilities.
- Potential uses for the BCEAO include:
- Identifying relevant shocks.
- Mapping shock propagation into the WAEMU regional economy.
- Better supporting monetary policy decisions through improved diagnosis and projection.
Source: IMF Working Paper "A Quarterly Projection Model for the WAEMU" (authors: Carlos de Resende, Alsim Fall, Demba Sy; October 28, 2022).
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