Chapter 16: The annual macroeconometric model of the Banco de Portugal
Gabriela Lopes de Castro 1 INTRODUCTION This chapter brieﬂy describes the main features and uses of the Annual Macroeconometric Model (AMM). Since spring 2001, this model has been the main macroeconomic forecasting tool used by the Banco de Portugal. The projections for the Portuguese economy are generated using additional models, namely a small-scale quarterly inﬂation-forecasting model1 and some bridge models, which are intended to provide non-causal forecasts for the short-term quarterly developments. In addition, a small-scale model incorporating forward-looking elements is being developed, mainly oriented to provide simulations of ﬁscal policy changes. The reason why an annual rather than a quarterly model was chosen, is mainly the lack of consistent and reliable quarterly time series for the Portuguese economy with the suﬃciently long period of time that is required for econometric estimation.2 Moreover we have to estimate causality links with a degree of detail that is not possible with a quarterly frequency, in particular in the case of general government variables. Indeed one of the special features of the model is its very comprehensive and fully integrated block of public ﬁnances. Since 2001, some progress has been made in the AMM. Besides some improvements in the model equations, other important developments are still being carried out, namely, improvements in the ﬁnancial block of the model. Additionally some work has also been devoted to the possible introduction of forward-looking elements that might improve the results for some simulation and for the convergence towards the long-run path. Therefore, this...
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