Edited by Gabriel Fagan and Julian Morgan
Chapter 6: The National Bank of Belgium's quarterly model
6. The National Bank of Belgium’s quarterly model Philippe Jeanﬁls This chapter brieﬂy describes the main features of the current version1 of the National Bank of Belgium’s quarterly macroeconomic model. This version of the model still needs to be ﬁnalized, therefore some results presented here may be revised as new developments take place before the new model is ﬁnalized and published. 1 INTRODUCTION The model we currently use for Belgium was developed in the late 1990s and has replaced a larger multisectoral model which was used previously. It is estimated on quarterly seasonally-adjusted data and has an explicit theoretical structure. Private agents are optimizing over time in the presence of adjustment costs, which leads to an explicit separation of expectations from response lags in many dynamic equations. These costs introduce nominal rigidities leading to Keynesian types of eﬀects in the short run while the steady state growth rate is determined by the labour force and technological progress. The clear delineation of expectations allows the model to answer economic policy-related questions under diﬀerent expectations formations, from limited information to model-consistent rationality. The development of this new model of the Belgian economy provided the opportunity to incorporate certain characteristics reﬂecting recent theoretical and empirical features. One of the main motivations in building our model is our belief that a gap has emerged between traditional econometric macromodels and modern macroeconomic theory. Contrary to many traditional macroeconometric models, the Belgian model is based on formal theories of optimal planning...
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