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

_IMF Working Papers, November 10, 2023_

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## Bibliographic details
- 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

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### Overview
- 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.

### Key innovations of FINEX
- 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.

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

### Model features and methodology
- 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.

### Applications, scope, and limitations
- 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.

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_Source: https://www.imf.org/en/publications/wp/issues/2023/11/10/finex-a-new-workhorse-model-for-macroeconomic-forecasting-and-policy-analysis-541416_