Medium-term projection model of the National Bank of Serbia

Mirko Djukic, Jelena Momcilovic and Ljubica Trajcev
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Mirko Djukic: National Bank of Serbia
Jelena Momcilovic: National Bank of Serbia
Ljubica Trajcev: National Bank of Serbia

Working papers from National Bank of Serbia

Abstract: Medium-term projections are an important element of the decision-making process in an inflation targeting regime, that the National Bank of Serbia has been implementing for the past several years. The main goal of medium-term projections is to give an answer to what should be the policy rate path that would ensure that inflation in the coming period moves close to the targeted inflation rate. The most important tool for medium-term projections is a macroeconomic model, which is a set of equations aiming to describe the price-formation mechanism in Serbia and the transmission channel of monetary policy to prices. The model is comprised of four main behavioral equations for inflation, exchange rate, output gap and policy rate, and of a number of side behavioral equations and identities. For estimating trends and gaps on history, we use multivariate Kalman filter. The model in the current form has been used since end-2008 and is subject to regular adjustments and improvements.

Keywords: medium-term projection model; inflation targeting; Kalman filter (search for similar items in EconPapers)
JEL-codes: C53 E17 E58 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2010-12
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Persistent link: https://EconPapers.repec.org/RePEc:nsb:wppnbs:17

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