Finex - a New Workhorse Model for Macroeconomic Forecasting and Policy Analysis

123 Pages Posted: 6 Dec 2023

See all articles by Andrew Berg

Andrew Berg

International Monetary Fund (IMF) - Developing Country Studies Division

Yaroslav Hul

International Monetary Fund (IMF)

Philippe D. Karam

International Monetary Fund (IMF)

Adam Remo

International Monetary Fund (IMF)

Diego Rodriguez Guzman

International Monetary Fund (IMF)

Abstract

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.

Keywords: Semi-Structural Modeling, Monetary Policy, Fiscal Policy, Foreign Exchange Intervention, Forecasting, Imperfect Capital Mobility

JEL Classification: C54, E52, E58, F41, G18

Suggested Citation

Berg, Andrew and Hul, Yaroslav and Karam, Philippe and Remo, Adam and Rodriguez Guzman, Diego, Finex - a New Workhorse Model for Macroeconomic Forecasting and Policy Analysis. IMF Working Paper No. 2023/235, Available at SSRN: https://ssrn.com/abstract=4655687 or http://dx.doi.org/10.5089/9798400259937.001

Andrew Berg (Contact Author)

International Monetary Fund (IMF) - Developing Country Studies Division ( email )

700 19th Street NW
Washington, DC 20431
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202-623-8843 (Phone)
202-589-8843 (Fax)

Yaroslav Hul

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Philippe Karam

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Adam Remo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Diego Rodriguez Guzman

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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