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SDS-FPS: a small demand-side version of the Forecasting and Policy System core model

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Abstract

This paper describes the development of SDS-FPS, which is a small demand-side model calibrated to match some of the dynamic properties of the Reserve Bank's Forecasting and Policy System (FPS) core model. SDS-FPS is capable of matching the dynamic properties of FPS for a wide range of disturbances, despite lacking relative prices, having no explicit supply side, and having the entire demand side described by a single IS equation. The calibration of SDS-FPS has also provided some insights into the features of FPS that cannot be replicated in a small demand-side model. The size of SDS-FPS makes its use feasible in situations where the use of FPS may not be practical. For example, stochastic simulation experiments can be performed much faster with SDS-FPS than with FPS, making more complex experiments computationally feasible.

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  • David Hargreaves, 1999. "SDS-FPS: a small demand-side version of the Forecasting and Policy System core model," Reserve Bank of New Zealand Discussion Paper Series G99/10, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbdps:1999/10
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    Cited by:

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    2. John C. Robertson, 2000. "Central bank forecasting: an international comparison," Economic Review, Federal Reserve Bank of Atlanta, vol. 85(Q2), pages 21-32.
    3. Mr. Victor Gaiduch & Mr. Benjamin L Hunt, 2000. "Inflation Targeting Under Potential Output Uncertainty," IMF Working Papers 2000/158, International Monetary Fund.
    4. David Rae & David Turner, 2001. "A Small Global Forecasting Model," OECD Economics Department Working Papers 286, OECD Publishing.
    5. Victor Gaiduch & Benjamin Hunt, 2000. "Inflation targeting under potential output uncertainty," Reserve Bank of New Zealand Discussion Paper Series DP2000/08, Reserve Bank of New Zealand.

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