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A Pragmatic Model for Monetary Policy Analysis I: The Case of Pakistan

Author

Listed:
  • Shahzad Ahmad

    (State Bank of Pakistan)

  • Farooq Pasha

    (State Bank of Pakistan)

Abstract

We present the application of Forecasting and Policy Analysis System (FPAS) for monetary policy analysis in Pakistan. FPAS is a customized Dynamic Stochastic General-Equilibrium model widely used for monetary policy analysis. Over an eight-quarter horizon and in normal times, the inflation forecasting accuracy of the model is found to be superior to combinations of econometric models; while in more turbulent times the FPAS model compares at least as favorably to the alternatives. The model offers various scenario building tools to check robustness of the baseline forecasts.

Suggested Citation

  • Shahzad Ahmad & Farooq Pasha, 2015. "A Pragmatic Model for Monetary Policy Analysis I: The Case of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 1-42.
    • Handle: RePEc:sbp:journl:65
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    References listed on IDEAS

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    Cited by:

    1. Aadil Nakhoda, 2014. "The Influence of Industry Financial Composition on the Exports from Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 10, pages 21-49.
    2. Fayyaz Hussain & Zafar Hayat, 2016. "Do Inflation Expectations Matter for Inflation Forecastability: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(3), pages 211-225.
    3. Nyoni, Thabani, 2018. "Modeling and Forecasting Inflation in Zimbabwe: a Generalized Autoregressive Conditionally Heteroskedastic (GARCH) approach," MPRA Paper 88132, University Library of Munich, Germany.
    4. Naafey Sardar & Zulfiqar Hyder, 2022. "Does the source of the oil price shock matter for inflation in Pakistan: Implications for monetary policy," SBP Working Paper Series 110, State Bank of Pakistan, Research Department.
    5. Shahzad Ahmad & Adnan Haider, 2019. "An evaluation of the forecast performance of DSGE and VAR Models: The case of a developing country," Business Review, School of Economics and Social Sciences, IBA Karachi, vol. 14(1), pages 28-52, January-J.

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    More about this item

    Keywords

    Monetary policy; DSGE model; Pakistan;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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