The Bank of Italy Econometric Model: An Update of the Main Equations and Model Elasticities

The Bank of Italy quarterly econometric model (BIQM) is a large-scale ‘semi structural’ macro-econometric model. It tries to strike the right balance between theoretical rigour and statistical fit to the data. This paper provides an update of the features and the properties of the model, focussing on the empirical estimates of its main equations and on the system responses to various shocks; interactions and feedback mechanisms between the financial and the real side of the economy are also illustrated. The BIQM is primarily used to produce macroeconomic forecasts, but it is also employed – in conjunction with other tools – for evaluating the impact of monetary and fiscal policy options and for counterfactual analyses. Examples of the types of macro-economic analyses carried out with the model are provided.