Quarterly Forecasting Model (MPT)

This paper describes the Quarterly Forecasting Model (MPT) used at the central bank of Peru for monetary policy simulation and for forecasting key macroeconomic variables. The model version illustrated here corresponds to December 2007. The basic structure of the model parallels a typical textbook neo-keynesian model but is tailored to suit the setup of a small open economy with financial dollarization. The paper shows moment simulations, model responses to various shocks hitting the economy and ends with remarks about the model-based forecasting process at the central bank of Peru.