External evaluation of the National Bank of Georgia's core macroeconomic model
The Georgian Economy Model (GEMO) is a core tool within the Forecasting and Policy Analysis System of the NBG. Its results, in the form of projected macroeconomic variables, have a major impact on the decision of the Monetary Policy Committee. Therefore, the reliability of the model is of utmost importance.
Tobias Cwik, PhD, visited the NBG in August 2019 to do an external evaluation of the model as a part of technical assistance. He is currently a Senior Economist at the Swiss National Bank having previously served as an Economist of the Federal Reserve Board (the US). He has an extensive experience in model building and analysis.
prepared by Tobias Cwik points out that the model is theoretically,
institutionally, and empirically coherent. It incorporates the main
transmission channels of monetary policy in Georgia while accounting for
certain characteristics of the Georgian economy. In addition, the model reflects
views of the MPC about the economy. The analysis of projections revealed that the
model does a good job in forecasting the main macroeconomic variables. According
to the external evaluation, the forecast accuracy is especially good for
inflation, the main variable for monetary policy-making. The evaluation also
yielded several suggestions and recommendations pertaining to the design of
some model equations and possible extensions.
Link to the external evaluation report.