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Policy analysis in real time using IMF's monetary model

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  • Akram, Q. Farooq

Abstract

We investigate to what extent estimated relationships of the IMF's monetary model and their policy implications are sample dependent. We observe that estimates of the model's key parameters and model-based measures of macroeconomic disequilibria are highly dependent on the data vintage employed. Changes in parameter estimates solely due to data revisions are found to be much smaller than those owing to parameter instability, possibly reflecting model misspecification. Moreover, instability in parameter estimates contributes to more uncertainty in assessments of macroeconomic disequilibria than data revisions. Analyses based on a version of the model in difference form are also found to be quite sensitive to the data vintage employed, although to a lesser extent than those based on the standard version of the model with variables in levels.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 4 (July)
Pages: 1696-1709

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1696-1709

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Real time data Data and model uncertainty IMF Financial programming;

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Cited by:
  1. Q. Farooq Akram, 2010. "Policy analysis in real time using IMF's monetary model," Working Paper 2010/10, Norges Bank.

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