Repository of macro models

This repository contains descriptions of macro-models which relate to papers published or forthcoming in Economic Modelling

The core model of the Reserve Bank of New Zealand's Forecasting and Policy System

Title of Paper: The core model of the Reserve Bank of New Zealand's Forecasting and Policy System

Authors:
Benjamin Hunt, Economics Department, Reserve Bank of New Zealand, New Zealand
David Rose, QED SOLUTIONS, Ottawa, Ontario, Canada
Alasdair Scott, Economics Department, Reserve Bank of New Zealand, New Zealand

Vol./Issue No.: 17/2, pp. 247-274

Short description: The Reserve Bank of New Zealand's Forecasting and Policy System (FPS) has been designed to support policy analysis and quarterly economic projections under an inflation-targeting regime. The core model, which is calibrated, has been built with a focus on its aggregate properties. Solutions converge to a well-defined steady-state growth path. The model's dynamics arise from polynomial adjustment costs, explicit modelling of expectations, and endogenous behaviour of the fiscal and monetary authorities.

FPS utilises the Blanchard-Buiter-Weil model of overlapping generations in a one-good, small open economy. The optimising behaviour of households and firms together with decisions of government determine desired asset positions. Prices and expenditure flows adjust to achieve and maintain those desired stocks. The monetary authority provides a nominal anchor for the system, setting the policy instrument using a forward-looking rule that ensures that projected inflation converges on the announced target rate.

JEL classification: C50; E17

Keywords: Macroeconomic model; Inflation targeting

Country: New Zealand

Linkage address: http://www.rbnz.govt.nz/econ/fps_eqns.pdf

Disclaimer: Responsibility for the full model structures of the models in this repository rests solely with the authors.

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