## An Open Economy Quarterly Projection Model for Sri Lanka

_IMF Working Papers, June 25, 2018_

## Source details

**Canonical URL:** [An Open Economy Quarterly Projection Model for Sri Lanka](https://www.imf.org/en/publications/wp/issues/2018/06/25/an-open-economy-quarterly-projection-model-for-sri-lanka-45984)

## Other formats

- [Markdown version](/en/publications/wp/issues/2018/06/25/an-open-economy-quarterly-projection-model-for-sri-lanka-45984/index.md)
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## Bibliographic details
- Authors: Chandranath Amarasekara, Rahul Anand, Kithsiri Ehelepola, Hemantha Ekanayake, Vishuddhi Jayawickrema, Sujeetha Jegajeevan, Csaba Kober, Tharindi Nugawela, Sergey Plotnikov, Adam Remo, Poongothai Venuganan, Rasika Yatigammana
- Published: June 25, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484361511.001

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### Model overview
- Documents a semi-structural model developed for Sri Lanka.
- Extended with a fiscal sector block to serve as a core forecasting model in the Central Bank of Sri Lanka’s move towards flexible inflation targeting.
- Gap model that allows for simultaneous identification of business cycle position and long-term equilibrium.
- Includes forward-looking endogenous interest rate and foreign exchange rate policy rules allowing for flexible change in policy behavior.

### Estimation and calibration
- Model was first calibrated.
- Data-fit was improved using Bayesian estimation technique with relatively tight priors.

### Intended use and policy relevance
- Expected to serve as a core forecasting model supporting the transition to flexible inflation targeting.
- Supports analysis of monetary policy through:
  - Forward-looking endogenous nominal interest rate rule.
  - Forward-looking endogenous foreign exchange rate policy rule.
- Facilitates identification of excess demand and output gap dynamics in an open economy setting.

### Key thematic coverage (as stated in source)
- Economic forecasting
- Exchange rates; Foreign exchange
- Inflation; Inflation targeting; Inflation expectation; Headline inflation; Sri Lankan inflation
- Monetary policy; Nominal interest rate
- Output gap; Prices; Real exchange rates
- Administered energy inflation; Energy inflation; Transport inflation; World oil price dynamics
- Forecasting and Policy Analysis System; Flexible Inflation Targeting; Quarterly Projection Model; Open economy; Sri Lankan economy

*Source: An Open Economy Quarterly Projection Model for Sri Lanka (IMF Working Papers).*

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## Content in this bundle

- **An Open Economy Quarterly Projection Model for Sri Lanka, WP/18/149, June 2018**
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_Source: https://www.imf.org/en/publications/wp/issues/2018/06/25/an-open-economy-quarterly-projection-model-for-sri-lanka-45984_