Econometric Models of the Euro-area Central Banks

Econometric Models of the Euro-area Central Banks

Edited by Gabriel Fagan and Julian Morgan

This book provides a description of the main macroeconomic models used by the European Central Bank and the euro area national central banks (Eurosystem). These models are used to help prepare economic projections and scenario analysis for individual countries and the euro area as a whole.

Chapter 14: MORKMON: a macroeconomic model of the Netherlands economy

Peter van Els

Subjects: economics and finance, econometrics, money and banking


14. MORKMON: a macroeconomic model of the Netherlands’ economy Peter van Els The MORKMON model was developed at De Nederlandsche Bank (DNB) in the early 1980s and has undergone various changes and extensions over the years.1 The current version of the model is described in van Els and Vlaar (1996). Since the publication of this report, equations have been updated in the light of recent economic history when necessary, but the structure of the model has remained broadly unaltered. Further changes are currently under consideration because of ESA-95 and changes in the availability of monetary data. 1 THE USES OF THE MODEL MORKMON is used in short-term forecasting, in conducting policy and scenario analyses, and in counterfactual simulation exercises.2 These activities serve DNB’s internal process of policy preparation. Forecast horizons cover a short period of up to two years ahead in most cases, although just occasionally they cover slightly longer horizons. An example is the ex ante assessment of a new cabinet’s economic policy package at the beginning of its four-year term. Projections are a combination of model-generated and judgmental information. Judgmental sources include available off-model information taken from new releases of cyclical and price indicators, or from predictions based on other in-house or external models. Scenario analyses usually address topics such as the transmission of monetary policy; the implications of fiscal and budgetary policies for output and inflation; labour market policy, social security regulation and wage formation; the macro implications of asset price developments; and explaining the...

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