South African Model Extension
The aim of the project is to extend the current reduced version of the South African model in NiGEM to a full country model. Expanding the NiGEM South African country model will improve its policy analysis to a global level and improve its ability to track the impact of a wider range of policy impacts. As such, the model will now be able to reach new policy areas such as macroprudential and monetary policy coordination
Summary & aims
The NIGEM model incorporates key macroeconomic relationships. Specific country models feature sticky prices, rational and adaptive expectations, Taylor rule, trade, and long-run fiscal solvency. Furthermore, NiGEM provides the ability to integrate user changes, and amend parameters, provides a historical and forecast database, specific country forecasts, scenario analysis, and stochastic simulations. The aims of the project are twofold. The first goal is extend the South African Model from a reduced country model to a full country model. The main differences between full country models and reduced country models are: full country models have a fully developed demand side whilst reduced country models have an aggregated demand side; full country models include a fully specified labour market, which reduced country models exclude. Expanding the NiGEM South Africa country model will, therefore, improve its policy analysis to a global level. The second goal is to incorporate a banking sector in the South African model.
The methodological approach involves identifying missing variables and creating a model template; sourcing data for the new variables; re-estimating equations; creating forecast base; model testing and calibration; final incorporation into main NiGEM model.