2022-09-01-IMF-Quarterly_Projection_Model_for_the_Bank_of_Ghana_39页_1mb

Quarterly Projection Model for the Bank of Ghana

This paper details the Quarterly Projection Model (QPM) underlying the Bank of Ghana's Forecasting and Policy Analysis System (FPAS), a semi-structural New Keynesian model incorporating Ghana's economic features including food and non-food inflation decomposition, fiscal policy effects, and monetary policy credibility considerations.

Key components and structure

• Core equations: Includes inflation (for food and non-food), aggregate demand, exchange rate, and monetary policy reaction functions.
• Inflation decomposition: Headline CPI split into food and non-food indices with separate Phillips curves.
• Fiscal policy: Explicitly included as a driver of output gap.
• Monetary policy credibility: Incorporates a credibility channel reflecting past inflation deviations from target.
• Calibration: Focused on steady states, coefficients, and shock standard deviations.

Out-of-sample performance

The model demonstrates strong forecasting accuracy, significantly outperforming a random walk benchmark across key variables.

Policy relevance

The model supports forward-looking monetary policy by providing insights into inflation dynamics, response to structural shocks, and simulation of disinflation scenarios.

In conclusion, the QPM serves as a crucial analytical tool for the Bank of Ghana's policy framework, effectively capturing economic dynamics while demonstrating empirical robustness.