Keywords

semi-structural model, Croatia, simulations, forecasting

This paper describes the latest version of the semi-structural macro model of Croatia – the PACMAN (Policy Analysis Croatian MAcroecoNometric) model. PACMAN is a medium-sized  macroeconometric model with a high level of aggregation, which accounts for the relationships among key macroeconomic variables in a systematic manner. Although highly aggregated the model is sufficiently detailed to be able to describe the most important characteristics of the Croatian economy.

The model follows the approach of many central banks in the EU (e.g. Austria, France, Poland, Italy and ECB etc.). PACMAN is designed in a way as to be usable for: (i) forecasting, (ii) scenario and (iii) policy simulation exercises at the CNB. PACMAN is also used in the context of financial sector stress testing.

The model’s core equations adhere to economic theory but are also modified so as to have a good empirical fit. Due to its theoretical consistency and numerous transmission channels, PACMAN can provide a narrative for sources and consequences of economic developments.