Page 34 - Azerbaijan State University of Economics

Hashim Al-Ali: An integrated macro-fiscal forecasting model and its application for
the Bangladesh economy

Hashim Al-Ali: An integrated macro-fiscal forecasting model and its application for
the Bangladesh economy

the segments of the national economy (real economy, fiscal, financial and external sector) included

in the model and brought together, in an economically viable causal-chain sequential relationship,
with impact oriented and feed-back solutions processes. The constructed model however, has been

structured in such a way so that it can be absorbed by the prevailed technical capabilities and
capacities of the existing MOF/macroeconomic wing (MEW) staff, can be calibrated, empirically

articulated, and implemented as well as run with different economic and development scenario
alternatives, for future projections, and hence, it can be used as an effective tool for forecasting and

decision as well as policy making process.

Accordingly, the integrated macro-fiscal forecasting model has been constructed and
established based on the following principles and assumptions:

 The macro-fiscal forecasting model constructed and implemented during this assignment,

for Bangladesh economy, is a comprehensive integrated economic and fiscal model, in which all
the segments of the national economy of Bangladesh, i.e. real economy, fiscal sector, financial

(monetary) sector, external sector and social sector, have been structured and modeled, in such a
way that economic decomposable relationships and interactions of the various segments with each

other have been captured and worked out, and hence, identifying and measuring the behavioral
impacts on each other development and progress, in expansion and/or contraction. Thus, such an

interactions and feed-backs between different segments of the economy, have been considered as

the main backbone of this applied model.
 Methodologically, the model is a forecasting, strategic simulation and decision/policy

making model, based on specifying and structuring a variety of simultaneous equations and
systems relationships. Moreover, and in order to empirically solve these structured system of

equations and economic functional relationships, the adopted modelling techniques is based on
and applied a hybrid approach of econometric methods, algebraic settings, and mathematical

techniques and algorithms. These all based on the general equilibrium concepts and principles.

 Essentially, the model is a macro-fiscal forecasting and simulation model, but actually,
in its schematic framework has been developed and gone further than this. Therefore, it has

economically adopted and specifically built-in an “equilibrium mechanism” on different aspects

and dimensions, in a dynamic and non-linear setting.
 The model, in order to be complete and more beneficial to the development of

Bangladesh economy and its future outlook, has been deliberated to cover further economic

33