TY  - GEN
AU  - Suescún, Rodrigo
TI  - A Tool for Fiscal Policy Planning in a Medium-Term Fiscal Framework: The FMM-MTFF Model
PY  - 2018
Y1  - 2018/10/29
DO  - 10.18235/0001372
AB  - This paper describes the FMM-MTFF model, a dynamic stochastic general equilibrium model developed by the Fiscal Management Division (FMM) of the Inter-American Development Bank (IDB) to support the implementation of a medium-term fiscal framework (MTFF) in emerging market and developing economies. Relative to existing models, the present model incorporates several non-standard features. First, fiscal policy is defined in terms of multi-year fiscal plans, instead of restricting attention to univariate, single-period fiscal shocks. Second, the model does not impose the straightjacket of a standard fiscal rule. Under a standard fiscal feedback rule, fiscal policy is countercyclical and sustainable by design and any fiscal challenge is mechanically addressed. Third, the model is calibrated to match a three-sector, stylized version of a country’s input-output (I-O) table, which provides a consistent framework on industry output, intermediate input flows, and final demand use data. Fourth, the model embeds a more realistic GDP measurement framework, one that is consistent with what national account compilers do. The model uses a chain-linking method to aggregate real GDP. The model is calibrated to Colombian and Peruvian data to illustrate the use of the model as a tool to quantify the scale of the fiscal challenges, provide consistent medium-term macro fiscal projections, and assess the quantitative implications of past reforms and alternative fiscal policy plans on the economies, that is, the typical questions of interest to an MTFF.
UR  - https://doi.org/10.18235/0001372
ER  -