Template-Type: ReDIF-Paper 1.0

Author-Name: Gábor Dániel Soós  
Author-X-Name-First: Gábor Dániel
Author-X-Name-Last: Soós
Author-Email: soosg@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)

Author-Name: József Kelemen
Author-X-Name-First: József
Author-X-Name-Last: Kelemen
Author-Email: kelemenj@mnb.hu 
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)

Author-Name: Milán Horváth
Author-X-Name-First: Milán
Author-X-Name-Last: Horváth
Author-Email: horvathm@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)
Title: Polaris, the new tool for central bank forecasting in Hungary
Abstract: Economic models are used to represent real-world developments in a simplified form and present them in a consistent framework. However, the necessary simplifications may have several advantages and sometimes even disadvantages. The latter can be overcome by applying the so-called ‘multi-model approach’. The Magyar Nemzeti Bank takes into account the results of various models in its macroeconomic analyses and forecasts. This approach led to the creation of the Polaris macroeconometric model presented here. Since 2016, the central bank’s main forecasting tool has been a model representing a small, open economy based on the DSGE philosophy. The Polaris model, on the other hand, belongs to a group of models using a different philosophy. We believe that this model may be a useful supplement and aid in preparing and analysing forecasts and the results of economic simulations. Accordingly, the Polaris model is primarily suited for supporting the internal forecasting processes of the quarterly Inflation Report, as well as simulating unique and complex economic policy effects. It represents a new tool and a new opportunity to examine and understand Hungarian macroeconomic developments in as much detail and depth and as accurately as possible, in order to provide a consistent, highly robust macroeconomic picture.
Length: 70 pages
Creation-Date: 2020
File-URL: https:https://www.mnb.hu/letoltes/mnb-wp-2020-1-final.pdf
File-Format: Application/pdf
Number: 2020/1
Classification-JEL: C50, C51, C53, E21, E27, E31, E37.
Keywords: econometric modelling, estimation and forecasting, consumption, saving, forecasting, inflation, monetary policy, non-rational expectations.
Handle: RePEc:mnb:wpaper:2020/1