Our collaboration with the central banks of Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan created a comprehensive macroeconomic modeling system based on theoretical and empirical grounds.
The analysis of economies in emerging and frontier markets is complex and common sense and qualitative judgment usually prove insufficient in identifying the key drivers. However, state-of-the-art modeling concepts provide bottom-up quantitative analysis that allows better reflection on macroeconomic issues in these countries.
The challenge we faced here was to identify key country-specific characteristics and incorporate them into the model in order to produce results that approximate the local economic developments.
We developed a modeling framework that incorporates those aspects of the economy that the local authorities are interested in, hence providing a tool that enhances the central banks’ decision-making and communication.
With our assistance, the central banks have successfully implemented the latest modeling techniques, which has enabled them to remove ad hoc forecasting from their monetary policy process. This advent has increased not only their effectiveness but also their credibility, which is a quality pursued by central banks around the globe.
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