Description

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.

More publications in this series: Working Papers

More publications 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