Forecasting System for the Eurasian Economic Union

• Report

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Joint Report by the Eurasian Economic Commission and the Eurasian Development Bank

The evolution of the Eurasian Economic Union (EAEU) and the deepening integration within that alliance present many challenges for economists, with intriguing questions regarding the mechanisms for coordinated economic policies and the governing principles to achieve common objectives. Previously, to make informed decisions, it was enough to be familiar with the relevant national economy. Now it takes much more: first, a profound understanding of the numerous linkages among regional economies and shock-transmission channels, and second, an ability to view the EAEU economy as an indivisible unity. Successful completion of those tasks calls for creating, and making ample use of, state-of-the-art macroeconomic analysis and forecasting tools.

This work builds upon the findings of the joint research undertaken by the Eurasian Development Bank (EDB) and the Eurasian Economic Commission (EEC) to create a system capable of generating economic forecasts for EAEU member states, subject to any applicable country-specific social components. The project has yielded an Integrated System of Models covering five countries. It can be used to analyze economic processes, make projections, and develop proposals and guidance on streamlining economic policies within the EAEU. An important advantage of the Integrated System of Models is that it enables application of analytical and forecasting tools both separately (to individual EAEU member states) and collectively (to the entire integrated alliance), taking into consideration the linkages that exist between its economies and the external world.

Similar systems have been successfully employed by international financial organizations, central banks, and other institutions. They are based on dynamic stochastic models of general equilibrium between the monetary and fiscal sectors. Models of this class make it possible not only to assess the position of an economic system within the business cycle and project fundamental variable movements, but also to analyze the sources of, and optimal responses to, various shocks, fiscal indicator changes, and interactions between monetary and fiscal policy instruments. Currently, this framework is extensively used by the EDB to examine the prospects, instruments, and optimal strategies of EAEU monetary and fiscal policy coordination. The Integrated System of Models is a modern analytical tool designed to add a systemic and structured dimension to the work carried out by analytical units of the Eurasian Development Bank and the Eurasian Economic Commission as they generate joint projections, prepare regular analytical documents, and develop recommendations to boost macroeconomic policies pursued by EAEU member states.

EDB Chairman of the Management Board

Dmitry Pankin