Chapter 10: The econometric model of the Bank of Greece
Nicholas Zonzilos 1 INTRODUCTION: A BRIEF HISTORICAL OVERVIEW Econometric modelling at the Bank of Greece started in 1975 when the ﬁrst model of the Greek economy was developed in the Econometric Forecasting Unit, then headed by Nicholas Garganas, now Governor of the Bank.1 In its initial version, the model was relatively small and limited in many respects, but it has been substantially extended and elaborated over the years. Since the late 1970s, the macro model has been the Bank’s primary formal model of the Greek economy. The model is used in a wide variety of activities, but mainly in forecasting and, to a lesser extent, for policy analysis. A comprehensive presentation of the model, as it stood in 1991, is included in a book written by Garganas (1992) entitled The Bank of Greece Econometric Model of the Greek Economy. At that time, the model contained 507 variables, 84 of which were determined by behavioural equations. Technical equations, accounting as well as reporting identities, completed the model, while 202 variables were exogenous. This earlier version of the model was deeply rooted in the Keynesian tradition: output was determined by aggregate demand, while the supply side was rather passive. Aggregate demand was built up by a series of equations describing the spending behaviour of diﬀerent agents in a detailed disaggregated manner. The particular focus of the speciﬁcation on aggregate demand reﬂected the main use of the model, that is, short-term forecasting. The accounts of the public sector were modelled...
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