The KTKV model of the economics department of the Bank of Finland : A semiannual model for forecasting world economic prospects

Abstract

The most recent version of the so called KTKV model is reported in this volume. The model has been estimated at the Economics Department of the Bank of Finland. It is designed to improve the ability of making independent forecasts of world economic prospects. Thus, the structure of the model is based on rather pragmatic matters. All the main components of world trade are generated though part of the trade flows are dealt with through analysis of the current balances of the (geographical) areas concerned. As several key variables are exogenous, many important simultaneous behavioural processes are omitted. However, in the course of several forecasting rounds, the KTKV model has shown its applicability in structuring the forecasting process and reducing the efforts required to reach a consistent view of world trade and inflation as well as of Finland's export markets and her price competitiveness.