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FINEX - A New Workhorse Model for Macroeconomic Forecasting and Policy Analysis
Author: Mr. Andrew Berg, Yaroslav Hul1, Mr. Philippe D Karam, Adam Remohttps://orcid.org/0000-0003-4793-09962, and Diego Rodriguez Guzman
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund
  • | 2 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund
Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 235
Language:
English
Publication Date:
10 Nov 2023
DOI:
https://doi.org/10.5089/9798400259395.001
ISBN:
9798400259395
ISSN:
1018-5941
Pages:
123
Keywords:
Semi-Structural Modeling; Monetary Policy; Fiscal Policy; Foreign Exchange Intervention; Forecasting; Imperfect Capital Mobility; policy analysis; fiscal policy instrument; gap-trend projection model; IMF working papers; foreign currency; policy lesson; Interest rate parity; Exchange rates; Capital account; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper presents a semi-structural macroeconomic model aimed at facilitating policy analysis and forecasting, primarily in countries with imperfect capital mobility and hybrid monetary policy regimes. Compared to earlier gap-trend projection models, the Forecasting Model of Internal and External Balance (FINEX) contains three main innovations: it accentuates external and internal balances; explicitly incorporates fiscal policy; and partly endogenizes the main trends. FINEX thus covers a broad set of policy instruments, including foreign exchange interventions (FXI), capital flow management measures (CFM), as well as common fiscal policy instruments. The model incorporates insights from the recent DSGE literature, while maintaining a more accessible gap-trend structure that lends itself to practical policy applications. While the paper refrains from drawing broad policy lessons, it emphasizes the model's ability to interpret recent data in terms of structural shocks and policy responses, thereby aiding policymakers in constructing coherent economic narratives and considering alternative scenarios.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund