Econometric Models of the Euro-area Central Banks
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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.
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Chapter 10: The econometric model of the Bank of Greece

Nicholas Zonzilos


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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