Bosnia and Herzegovina: Technical Assistance Report-Technical Assistance to Develop a Macroeconomic Framework at the Central Bank of Bosnia and Herzegovina

Technical assistance to develop a macroeconomic framework was delivered to the Central Bank of Bosnia and Herzegovina (CBBH) between April 2021 and December 2023. The Quarterly Macro Forecasting Framework (QMFF) developed during this project is a quarterly framework whose main behavioral equations are specified in terms of deviations of real variables from their long-run trends. The framework is a novel combination of a gap-based modeling approach and financial programing. This novel approach was custom-built for the CBBH, but it has the flexibility to be adjusted to accommodate the macroeconomic characteristics of various countries and different exchange rate regimes, as well as to incorporate backward- or forward-looking expectation formation. While considerable progress has been achieved in the operation of the QMFF, more time and resources are needed to fully utilize and integrate the QMFF as the CBBH’s main policy analysis and forecasting tool.