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P e SC Annual Conf 2008 A2 BG
P e SC Annual Conf 2008 A2 BG
IONAL
A
NIEI
BANCA
NAIONAL
AROM
ROMNIEI
Outline:
The forecasting process
The model
Further developments
Near-term models
NTF Inflation, GDP, ex. rate
and expert forecastetc.
Medium-term
(core)
model
Trends
&
Gaps
Assessment of initial conditions
and medium-term trends
Anticipated
shocks, fiscal
impulse, etc.
Final
medium-term
forecast and
risk scenarios
Tunes
Uncertainty
Expert judgment
BANCA NAIONAL A ROMNIEI
Event
Details
T-45
T-35
T-28
T-22
MPC meeting
T-16
T-10
MPC meeting
Inflation Report
T+1
MPC meeting
T+7
Task Force set up to implement IT framework consists of experts from Monetary Policy and
Macroeconomic Modelling Department and Research and Publications Department
Near-Term Forecasting
Two-quarter horizon forecasts for key variables
ARMAX model for core inflation and ECM for GDP
components; expert judgment incorporated
Economic theory as a basis of analysis, but emphasis on
forecasting accuracy
Used for analysis and for establishing the initial conditions
for the QPM
3. Transmission mechanism
NBRs monetary
policy rate
Lending
interest rates
Foreign
interest rate
Consumption
and
investment
borrowing
Consumption/
saving
decisions
Wealth and
balance sheet
effect
Fiscal and
income policies
Balassa-Samuelson
effect
Deposit
interest rates
Excess demand
Exchange rate
pass-through
Administered
and volatile
prices
Import
prices
CORE2 inflation
Expectations
CPI
inflation
3. Transmission mechanism
Interest rate channel
- relatively slow impact and limited efficiency
- monetary policy decisions transmitted through commercial banks
deposit and lending interest rates
Expectations channel
- quite significant; reflects second round effects of inflationary shocks
4. Model structure
Inflation components
Core inflation determined by its structural persistence, inflation
expectations, output gap, import price inflation and BalassaSamuelson effect
Administered price inflation given by an exogenous scenario
(discussions with the regulatory institutions on energy and
natural gas prices)
Fuel price inflation determined by its structural persistence,
international oil price, exchange rate and inflation expectations
Volatile prices inflation given by an exogenous scenario
(seasonally pattern, exchange rate)
BANCA NAIONAL A ROMNIEI
4. Model structure
Further developments
Implementing a DSGE model:
Advantages over the current model:
Fully structural
Non linear
Non-stationary steady state
Further developments
Draft evaluation of the model including:
Calibration
Filtering
Forecasting