Template-Type: ReDIF-Paper 1.0

Author-Name: Mikhail Andreyev
Author-Email: andreevmyu@cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation

Author-Name: Mikhail Andreyev
Author-Email: andreevmyu@mail.cbr.ru
Author-Workplace-Name: Bank of Russia, Russian Federation


Author-Name: Mikhail Andreyev
Author-Email: m.andreyev@inbox.ru
Author-Workplace-Name: Bank of Russia, Russian Federation


Title: Adding a fiscal rule into a DSGE model: How much does it change the forecasts? 
Abstract: This article analyses an expansion of the dynamic stochastic general equilibrium model 
presented in Kreptsev, Seleznev (2017) and used by the Bank of Russia to forecast macroeconomic variables. 
The model was supplemented with an extended description of the fiscal sector, which formalises the fiscal rule 
in effect in Russia and which is similar to the one used in Medina, Soto (2007). The model was estimated 
on the basis of Russian data. Based on impulse response functions, we analyse the stabilising effect 
of the fiscal rule on macroeconomic variables. It was found that the fiscal rule leads to a decrease 
in output volatility, a slight decrease in exchange rate volatility and a stronger disinflationary effect 
in response to a positive oil price shock. The forecast errors were used to analyse whether it is possible 
to apply the formalisation of the fiscal rule in order to improve the forecast of macroeconomic variables 
within the DSGE model. We found that the fiscal rule does not improve the quality of the forecasts. 



Length: 53 pages
Creation-Date: 2020-11
Revision-Date:
Publication-Status:
File-URL: https://www.cbr.ru/StaticHtml/File/117490/wp-64_e.pdf
File-Format: Application/pdf
File-Function:
Number: wps64
Classification-JEL: D58, E47, E62, E63
Keywords:  DSGE model, fiscal rule, reserve fund, credit cycle, commodity prices, financial frictions, monetary policy
Handle:RePEc:bkr:wpaper:wps64