Sds-Fps: A Small Demand-Side Version of the Forecasting and Policy System Core Model

Reserve Bank of New Zealand Working Paper No. G99/10

28 Pages Posted: 12 Nov 2002

See all articles by David Hargreaves

David Hargreaves

Government of New Zealand - Department of Economics

Date Written: December 1999

Abstract

This paper describes the development of SDS-FPS, which is a small demand-side model calibrated to match some of the dynamic properties of the Reserve Bank's Forecasting and Policy System (FPS) core model. SDS-FPS is capable of matching the dynamic properties of FPS for a wide range of disturbances, despite lacking relative prices, having no explicit supply side, and having the entire demand side described by a single IS equation. The calibration of SDS-FPS has also provided some insights into the features of FPS that cannot be replicated in a small demand-side model.

The size of SDS-FPS makes its use feasible in situations where the use of FPS may not be practical. For example, stochastic simulation experiments can be performed much faster with SDS-FPS than with FPS, making more complex experiments computationally feasible.

Suggested Citation

Hargreaves, David, Sds-Fps: A Small Demand-Side Version of the Forecasting and Policy System Core Model (December 1999). Reserve Bank of New Zealand Working Paper No. G99/10. Available at SSRN: https://ssrn.com/abstract=321380 or http://dx.doi.org/10.2139/ssrn.321380

David Hargreaves (Contact Author)

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

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