Macro-Economic Forcasts

The Bank of Israel Research Department compiles a staff forecast of macroeconomic developments on a quarterly basis. The forecast reflects the Department's assessments of expected developments of major variables, such as GDP and its components, employment, inflation, interest rates, exchange rates, and salaries. The forecast is based on several models, various data sources, and assessments based on economists' judgment. The Dynamic Stochastic General Equilibrium (DSGE) model developed in the Research Department-a structural model based on microeconomic foundations-plays a primary role in developing the macroeconomic forecast. The model allows for combining data from a number of sources to reach an integrative macroeconomic forecast of various variables, with internal consistency and an economic story. The DSGE model is also used to examine alternative scenarios and to evaluate the risks to the base forecast.