MONETARY POLICY REPORT | SPRING 2024 (infobox)
Starting with Monetary Policy Report – Spring 2024, the CNB’s macroeconomic forecast is prepared using an updated version of the g3+ core forecasting model. The g3+ model – the key analytical and forecasting tool of the economists of the CNB’s Monetary Department – ensures, among other things, that the forecasted macroeconomic variables are mutually consistent. The refinements made to the core model represent another step forward in forecasting practice at the CNB. The updates take into account the extreme economic events seen in recent years and the long experience of the department’s economists with the use of the g3+ core forecasting model in that period. The updates and the motivation for them were described in detail in the Appendix to Monetary Policy Report – Winter 2024, in which a shadow forecast prepared using the updated model was also presented.
The extraordinary economic phenomena of recent years were characterised by short, sharp swings on the supply side of economies and in energy prices. The expanded linkages in the foreign and domestic blocks help the model provide a truer description of the economic environment and enable it to capture such events in a structural – i.e. internally consistent, objective and replicable – way. The richer model structure allows for more detailed analysis of economic developments, such as a consistent estimate of the position of the foreign economy in the business cycle and a truer representation of the role of energy prices in the production process. The changes to the model’s steady-state parameters in the area of foreign trade fit the past long-run economic trends and also the expected future evolution of the Czech economy. Overall, the updated model is able to better describe and interpret observed economic developments not only for the period before the pandemic and the energy crisis, but also for the turbulent times of 2020–2023.