An Extended Quarterly Projection Model for the Central Bank of Jordan

IMF Working Papers, August 25, 2023

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Canonical URL: An Extended Quarterly Projection Model for the Central Bank of Jordan

Authors: Adel Al-Sharkas, Nedal Al-Azzam, Sarah AlTalafha, Rasha Abu Shawish, Ahmad Shalein, Auday Rawwaqah, Amany Al-Rawashdeh, Daniel Baksa, Philippe D Karam, Jan Vlcek
Published: August 25, 2023
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798400252716.001

The Central Bank of Jordan (CBJ) developed a Forecasting and Policy Analysis System (FPAS) to provide a reliable analytical framework for macroeconomic analysis, forecasting, and decision-making under a pegged exchange rate regime.
At the heart of the FPAS is the CBJ’s extended Jordan Analysis Model (JAM2.0).
JAM2.0 captures the monetary transmission mechanism and provides a consistent monetary policy framework that uses the exchange rate as an effective nominal anchor.
The paper outlines JAM2.0’s structure and properties and emphasizes the enhanced interplay and tradeoffs among monetary, fiscal, and foreign exchange management policies.
Simulation and forecasting exercises demonstrate JAM2.0’s ability to:
- match key stylized facts of the Jordanian economy,
- produce accurate forecasts of important macroeconomic variables, and
- explain the critical relationships among policies.

Central component: extended Jordan Analysis Model (JAM2.0) embedded in FPAS.
Key functional roles:
- capture monetary transmission mechanism under a pegged exchange rate,
- use the exchange rate as an effective nominal anchor for monetary policy,
- integrate monetary, fiscal, and foreign exchange management policy interactions and tradeoffs.

JAM2.0 is demonstrated through simulation and forecasting exercises that:
- reproduce key stylized facts of the Jordanian economy,
- produce accurate forecasts of important macroeconomic variables,
- provide a consistent analytical framework for policy decision-making under the peg.

JAM2.0 emphasizes enhanced interplay and tradeoffs among:
- monetary policy,
- fiscal policy,
- foreign exchange reserve management.
The FPAS framework supports policy analysis and decision-making for a pegged exchange rate regime by:
- providing a consistent nominal anchor (the exchange rate),
- allowing scenario analysis of policy interactions and consequences,
- informing forecasting exercises relevant to policymaking.