IMF Working Papers

An Open Economy Quarterly Projection Model for Sri Lanka

By Chandranath Amarasekara, Rahul Anand, Kithsiri Ehelepola, Hemantha Ekanayake, Vishuddhi Jayawickrema, Sujeetha Jegajeevan, Csaba Kober, Tharindi Nugawela, Sergey Plotnikov, Adam Remo, Poongothai Venuganan, Rasika Yatigammana

June 25, 2018

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Chandranath Amarasekara, Rahul Anand, Kithsiri Ehelepola, Hemantha Ekanayake, Vishuddhi Jayawickrema, Sujeetha Jegajeevan, Csaba Kober, Tharindi Nugawela, Sergey Plotnikov, Adam Remo, Poongothai Venuganan, and Rasika Yatigammana. An Open Economy Quarterly Projection Model for Sri Lanka, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This study documents a semi-structural model developed for Sri Lanka. This model, extended with a fiscal sector block, is expected to serve as a core forecasting model in the process of the Central Bank of Sri Lanka’s move towards flexible inflation targeting. The model includes a forward-looking endogenous interest rate and foreign exchange rate policy rules allowing for flexible change in policy behavior. It is a gap model that allows for simultaneous identification of business cycle position and long-term equilibrium. The model was first calibrated and then its data-fit was improved using Bayesian estimation technique with relatively tight priors.

Subject: Economic forecasting, Exchange rates, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Output gap, Prices, Real exchange rates

Keywords: Administered energy inflation, Energy inflation, Excess demand, Exchange rate, Exchange rates, Flexible Inflation Targeting, Forecasting and Policy Analysis System, Global, Headline inflation, Inflation, Inflation expectation, Inflation targeting, Monetary policy, Nominal interest rate, Open economy, Quarterly Projection Model, Real exchange rates, Rule equation, Sri Lanka, Sri Lankan economy, Sri Lankan inflation, Transport inflation, World oil price dynamics, WP

Publication Details

  • Pages:

    59

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/149

  • Stock No:

    WPIEA2018149

  • ISBN:

    9781484361511

  • ISSN:

    1018-5941

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