Front Matter Page Research Department Contents Abstract I. Introduction II. Morocco: Monetary Independence Under a Peg and Capital Controls III. Morocco: Main Features A. Capital controls and other regulations B. The fixed exchange rate regime and monetary policy C. Structure of the economy IV. The Moroccan Quarterly Projection Model (MQPM) A. A model for transition B. Special Features of the Moroccan QPM Model C. Selected Impulse Response Functions V. Conclusions and the Policy Uses of the QPM in Morocco References
developments in Mozambique if the standard deviations are not estimated properly. 13. It appears that the QPM implies a constant nominal exchange rate in the long run. The version of the QPM model used by DEE, was developed for a policy regime that can be characterized as a hybrid regime—partly exchange rate targeting and partly inflation targeting. A property of this version of the model is that the nominal exchange rate is automatically reverting to the (implicit/explicit) exchange rate target in the long run. This also implies that the domestic price-level is mean
(CIT)” scenario examines the benefits of a comprehensive transition to IT. Third, by using these two alternative model specifications we conduct counterfactual simulations of the policy response to the exchange rate devaluation of 2011 — to demonstrate potential macroeconomic benefits of a comprehensive IT framework during the times of crisis. 3 B. A QPM for Bangladesh 5. To facilitate monetary policy analysis and examine the tradeoffs between different monetary policy regimes, we developed a semi-structural QPM model that reflects closely the structure of
BM in making improvements in the QPM model and the forecasting process. Table 1. Key Recommendations Recommendations and Authority Responsible for Implementation Priority Timeframe 1 DEE arrange seminars for MPC on; (i) the reforming of the monetary policy f ramework into a system closer to IT; and (ii) the merits of the modeling system to support interest rate decisions. High Near-term Revise the modeling of the exchange rate in QPM High Near-term Actively use tools introduced by the July and September missions
monetary policy rate and r ¯ t is the neutral (nominal) interest rate. Finally, the error term in each equation, ε t , is a linear combination of forecast errors and an exogenous disturbance (by assumption, this error term is orthogonal to the set of instruments). 8. The QPM model gives a neutral interest rate of 4.4 percent . The model consist of four basic behavioral equations—for aggregate demand (IS curve), (short term) aggregate supply (Phillips curve), the UIP condition, and a Monetary Policy rule—and several identities. The aggregate demand equation includes
MT is formed and tasked to develop and maintain semistructural QPM model. October 2016 MT is trained in using the software for macroeconomic modeling and forecasting, and the first version of the QPM and adjacent codes infrastructure is developed. end-2016 MT staff is trained in operating the model codes infrastructure and in using the QPM to produce baseline projections, conditioning on available information (domestic and foreign sector data, NTF), and expert judgment. April 2017 MT is trained in conducting scenario analysis and in
exchange rate. These two parameters combined with a large values on the lagged gap term ( β lag = 0.85) and a small value on the lead of the output gap ( β lead = 0.10) result in hump-shaped dynamics in response to monetary induced interest rate shocks that do a satisfactory job replicating what is found in the Bank of Canada’s QPM model of the Canadian economy. To explain the strong correlation between the U.S. and the Canadian output gaps, we employ a fairly large parameter on the U.S. output gap in the Canadian output gap ( β USygap = 0.25). For the United States