A Macroeconometric Model for Bosnia and Herzegovina

This paper describes and evaluates a quarterly macroeconometric model for Bosnia and Herzegovina. Following the declaration of independence in 1992, Bosnia and Herzegovina plunged into a war that ended in 1995 with the Dayton/Paris peace agreement. The war caused major destruction as well as sharply rising inflation and unemployment. In addition, the peace agreement led to a significant fragmentation of competences between different entities. The unfavorable starting position of the transformation process toward a parliamentary democracy and a market economy, as well as the fragmented political structure, complicate the building of a macroeconomic model and limit the availability of reliable data. Data before 1999 are strongly influenced by the effects of the war and transformation. Moreover, some aggregates, such as the capital stock and quarterly national accounts series, are not officially published and had to be constructed. Nevertheless, the macroeconometric model can replicate the endogenous variables reasonably well.