FINEX - A New Workhorse Model for Macroeconomic Forecasting and Policy Analysis

IMF Working Papers, November 10, 2023

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Canonical URL: FINEX - A New Workhorse Model for Macroeconomic Forecasting and Policy Analysis

Authors: Andrew Berg, Yaroslav Hul, Philippe D Karam, Adam Remo, Diego Rodriguez Guzman
Published: November 10, 2023
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798400259395.001

Presents a semi-structural macroeconomic model designed for policy analysis and forecasting in countries with imperfect capital mobility and hybrid monetary policy regimes.
Emphasizes the model's ability to interpret recent data in terms of structural shocks and policy responses to help policymakers construct coherent economic narratives and consider alternative scenarios.
The paper refrains from drawing broad policy lessons, focusing instead on model construction and applications.

FINEX (Forecasting Model of Internal and External Balance) contains three main innovations compared to earlier gap-trend projection models:
- Accentuates external and internal balances.
- Explicitly incorporates fiscal policy.
- Partly endogenizes the main trends.

FINEX covers a broad set of policy instruments, including:
- Foreign exchange interventions (FXI).
- Capital flow management measures (CFM).
- Common fiscal policy instruments.

Semi-structural gap-trend structure that remains accessible for practical policy applications.
Incorporates insights from the recent DSGE literature while preserving a gap-trend framework.
Aims to facilitate both forecasting and policy analysis under imperfect capital mobility and hybrid monetary regimes.

Intended primarily for countries with imperfect capital mobility and hybrid monetary policy regimes.
Useful for interpreting data through the lens of structural shocks and policy responses and for constructing alternative scenarios.
The paper does not provide broad policy prescriptions; it emphasizes the model's interpretative and scenario-analysis capabilities.