FPAS – Forecasting and Policy Analysis System
FPAS serves for the purposes of information and analytical support in the decision-making regarding the monetary policy and consists of all elements required to target the inflation: data collection and processing; monitoring of the current economic situation; design and upgrade of the models; the decision-making regarding the monetary policy, as well as a transparent communication policy.
This system includes the process of developing short-term and medium-term forecasts of macroeconomic indicators in order to assess performance of the economy and development prospects, which are taken as the basis for strategic decisions on monetary policy. The forecast is carried out 4 times a year and depends on the release of statistical information.
FPAS consists of 2 main steps:
- analysis of current conditions and short-term forecast;
- medium-term forecast.
At the first stage, an analysis of the current dynamics of the main macroeconomic indicators, as well as short-term forecast by using econometric techniques is made and includes forecasting GDP using expenditure and production approaches, inflation and its components, also external assumptions (the main trading partners). The results are used to carry out the medium-term forecast (stage 2).
The medium-term forecast is based on the quarterly projection model (hereinafter-QPM). The QPM represents a simplified version of the structure of the Kazakhstan economy. All equations in the model have a log-linearized form. In turn, variables in the model are presented as gaps, i.e. deviations of actual values from their potential levels. The QPM includes three blocks: inflation process block, output gap block, and monetary policy block.
The model has an advantage of analyzing potential actions of the National Bank of the Republic of Kazakhstan depending on the domestic and external economic situation, enabling it to make decisions regarding the base rate based on the projected inflation rate and other macroeconomic indicators.
Thus, FPAS by taking into account the expected level of inflation, the structure of the economy and GDP growth allows to make a decision on the base rate for the medium term.