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Quarterly Projection Model for Croatia

Author

Listed:
  • Rafael Ravnik

    (The Croatian National Bank, Croatia)

  • Nikola Bokan

    (European Central Bank)

Abstract
This paper provides the documentation for a Quarterly Projection Model (QPM) used in regular forecasting exercises in the Croatian National Bank. The proposed model is a reduced-form representation of an Open Economy New Keynesian general equilibrium model, expanded with some ad hoc features in order to capture empirical evidence about the Croatian economy. Special attention is paid to open economy features of the model, financial stability issues related to the high degree of credit euroization and monetary policy modeling. The main contribution to the existing literature is the monetary policy rule, which is represented by an exchange rate reaction function with a slow-moving exchange rate target. The simulation and forecasting exercises conducted in this paper show that the model is able to produce precise forecasts of the main macroeconomic variables and to explain important relationships and the transmission mechanisms of the Croatian economy.

Suggested Citation

  • Rafael Ravnik & Nikola Bokan, 2018. "Quarterly Projection Model for Croatia," Surveys 34, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:survey:34
    as

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    File URL: http://www.hnb.hr/repec/hnb/survey/pdf/s-034.pdf
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    References listed on IDEAS

    as
    1. Ljubinko Jankov & Ivo Krznar & Davor Kunovac & Maroje Lang, 2008. "The Impact of the USD/EUR Exchange Rate on Inflation in the Central and East European Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 50(4), pages 646-662, December.
    2. Moron, Eduardo & Winkelried, Diego, 2005. "Monetary policy rules for financially vulnerable economies," Journal of Development Economics, Elsevier, vol. 76(1), pages 23-51, February.
    3. Runchana Pongsaparn, 2007. "Inflation Targeting in a Small Open Economy: a Challenge to Monetary Theory," Working Papers 2007-08, Monetary Policy Group, Bank of Thailand.
    4. Rafael Ravnik, 2014. "Short-Term Forecasting of GDP under Structural Changes," Working Papers 40, The Croatian National Bank, Croatia.
    5. Salas, Jorge, 2010. "Bayesian Estimation of a Simple Macroeconomic Model for a Small Open and Partially Dollarized Economy," Working Papers 2010-007, Banco Central de Reserva del Perú.
    6. Igor Ljubaj, 2012. "Estimating the Impact of Monetary Policy on Household and Corporate Loans: a FAVEC Approach," Working Papers 34, The Croatian National Bank, Croatia.
    7. Andreja Pufnik & Davor Kunovac, 2013. "Pricing behaviour of Croatian Companies: results of a Firm survey and a Comparison with the eurozone," Working Papers 36, The Croatian National Bank, Croatia.
    8. Davor Kunovac & Rafael Ravnik, 2017. "Are Sovereign Credit Ratings Overrated?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(2), pages 210-242, June.
    9. Davor Kunovac & Borna Špalat, 2014. "Nowcasting GDP Using Available Monthly Indicators," Working Papers 39, The Croatian National Bank, Croatia.
    10. Davor Kunovac, 2013. "The Borrowing Costs of Selected Countries of the European Union – the Role of the Spillover of External Shocks," Working Papers 38, The Croatian National Bank, Croatia.
    11. Marina Tkalec & Miroslav Verbič, 2013. "A new look into the prevalence of balance sheet or competitiveness effect of exchange rate depreciation in a highly euroised economy," Post-Communist Economies, Taylor & Francis Journals, vol. 25(2), pages 225-240, June.
    12. Goran Petrevski & Jane Bogoev & Dragan Tevdovski, 2015. "The transmission of foreign shocks to South Eastern European economies," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(4), pages 747-767, November.
    13. Petrevski, Goran & Exterkate, Peter & Tevdovski, Dragan & Bogoev, Jane, 2015. "The transmission of foreign shocks to South Eastern European economies: A Bayesian VAR approach," Economic Systems, Elsevier, vol. 39(4), pages 632-643.
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    Cited by:

    1. Darracq Pariès, Matthieu & Notarpietro, Alessandro & Kilponen, Juha & Papadopoulou, Niki & Zimic, Srečko & Aldama, Pierre & Langenus, Geert & Alvarez, Luis Julian & Lemoine, Matthieu & Angelini, Elena, 2021. "Review of macroeconomic modelling in the Eurosystem: current practices and scope for improvement," Occasional Paper Series 267, European Central Bank.
    2. Ozana Nadoveza Jelić & Rafael Ravnik, 2021. "Introducing Policy Analysis Croatian MAcroecoNometric Model (PACMAN)," Surveys 41, The Croatian National Bank, Croatia.
    3. Tania Karamisheva, 2021. "Measuring the Business Cycle in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 17-38.
    4. Anton Grui & Artem Vdovychenko, 2019. "Quarterly Projection Model for Ukraine," Working Papers 03/2019, National Bank of Ukraine.
    5. Dominika Ehrenbergerova & Simona Malovana, 2019. "Introducing Macro-Financial Variables into a Semi-Structural Model," Working Papers 2019/6, Czech National Bank.

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    More about this item

    Keywords

    projection model; unconventional monetary policy rule; nominal exchange rate; euroization;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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