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The BCRA’s Small Economic Model


  • Pedro Elosegui

    (Central Bank of Argentina)

  • Guillermo Escudé

    () (Central Bank of Argentina)

  • Lorena Garegnani

    () (Central Bank of Argentina)

  • Juan Martín Sotes Paladino

    (Central Bank of Argentina)


The use of macroeconomic forecasting models is a common practice in central banks for monetary policy design, for the analysis of the current economic developments and for medium and long term forecasts. Among those models, the small-scale macroeconomic models stand out. Though relatively simple, they are structured and take into account the transmission mechanisms that relate the main variables of interest: the interest rate, the exchange rate, GDP and inflation. The Small Economic Model (MEP) developed by the Central Bank of Argentina describes in a stylized and structured way the macroeconomic dynamics of a small and open country such as Argentina. This paper describes the structure of the MEP model in its two versions: an original version that is the core of the model and a second one that introduces the intervention of the monetary authority in the money and exchange rate markets. The main characteristics and limitations of the model and the estimation of parameters are depicted, and examples of the impulse-response functions resulting from both specifications are provided. Finally, the future research lines tending to strengthen the tools used by the BCRA for analysis, simulation and forecast are also mentioned.

Suggested Citation

  • Pedro Elosegui & Guillermo Escudé & Lorena Garegnani & Juan Martín Sotes Paladino, 2007. "The BCRA’s Small Economic Model," BCRA Working Paper Series 200718, Central Bank of Argentina, Economic Research Department.
  • Handle: RePEc:bcr:wpaper:200718

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    References listed on IDEAS

    1. Favero, Carlo A., 2001. "Applied Macroeconometrics," OUP Catalogue, Oxford University Press, number 9780198296850.
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    More about this item


    forecasting; general equilibrium; monetary policy; New Keynesian models;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


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