Given new programs and policies in the Philippines, there is a need to formulate a macroeconometric model (MEM) to gain more insights on how the economy and its sectors are affected. This paper discusses the estimation of an annual MEM that will be used for policy analysis and forecasting with respect to the opportunities and challenges brought about by new developments. The formulation of an annual MEM is useful in assisting major macroeconomic stakeholder, such as the National Economic and Development Authority and the Bangko Sentral ng Pilipinas (BSP) in their conduct of policy simulations, macroeconomic surveillance, and economic analysis. Given this backdrop, PIDS and BSP have collaborated to estimate an annual MEM, which has four blocks, namely, the real sector, fiscal sector, trade sector, and monetary sector. Using an Autoregressive Distributed Lag model approach, these sectors are modeled separately although the linkages with each other are specified. These sectoral models are then put together and tests on the predictive accuracy of the forecast of the overall model are conducted. Some ways to further improve the annual MEM are provided.
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