SLOPOL10: a macroeconometric model for Slovenia

This paper describes the SLOPOL10 model, a quarterly macroeconometric model of the Slovenian economy to be used for forecasting macroeconomic development and simulating alternative policy measures. The model is of the Cowles Commission type and is estimated using the cointegration approach, thus combining the long-run equilibrium and the short-run adjustment mechanism. It contains behavioural equations and identities for the goods market, the labour market, the foreign exchange market, the money market, and the government sector. Estimation of behavioural equations for Slovenian aggregates is based on data starting in 1995. The model combines Keynesian and neoclassical elements. The Keynesian elements determine the short and medium-run solutions in the sense that the model is demand-driven and persistent disequilibria in the goods and labour markets are possible. The supply side incorporates neoclassical features. Static and dynamic ex-post simulations show that the model can reasonably reproduce past development and is therefore suited for prediction and policy evaluation, especially for fiscal policy design and optimal control experiments.