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Reading: An Open Economy Quarterly Projection Model for Sri Lanka

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An Open Economy Quarterly Projection Model for Sri Lanka

Authors:

Chandranath Amarasekara ,

Central Bank of Sri Lanka, LK
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Rahul Anand,

Central Bank of Sri Lanka, LK
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Kithsiri Ehelepola,

Central Bank of Sri Lanka, LK
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Hemantha Ekanayake,

Central Bank of Sri Lanka, LK
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Vishuddhi Jayawickrema,

Central Bank of Sri Lanka, LK
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Sujeetha Jegajeevan,

Central Bank of Sri Lanka, LK
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Csaba Kober,

Central Bank of Sri Lanka, LK
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Tharindi Nugawela,

Central Bank of Sri Lanka, LK
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Sergey Plotnikov,

Central Bank of Sri Lanka, LK
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Adam Remo,

Central Bank of Sri Lanka, LK
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Poongothai Venuganan,

Central Bank of Sri Lanka, LK
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Rasika Yatigammana

Central Bank of Sri Lanka, LK
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Abstract

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.
How to Cite: Amarasekara, C., Anand, R., Ehelepola, K., Ekanayake, H., Jayawickrema, V., Jegajeevan, S., Kober, C., Nugawela, T., Plotnikov, S., Remo, A., Venuganan, P. and Yatigammana, R., 2018. An Open Economy Quarterly Projection Model for Sri Lanka. Staff Studies, 48(1), pp.21–66. DOI: http://doi.org/10.4038/ss.v48i1.4708
Published on 30 Jun 2018.
Peer Reviewed

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