47. Gap Model of the Visegrad Group

We propose a medium scale gap model of the Visegrad Group that incorporates core macroeconomic variables as aggregate demand, aggregate supply, interest rates, exchange rates and unemployment rates and is further enriched by a fiscal block. The model takes a form of global projection model, since it describes mutual linkages between the economies and their most important trading partner, the economy of the euro area. Although it is provided in mostly linear form and not properly derived from micro-foundations as dynamic stochastic general equilibrium models, the combination of relatively simple structure together with plausible impulse responses makes the model suitable for a policy analysis. Furthermore, since we model all trading partners as endogenous, we can capture spillovers between the economies and their final impact on macroeconomic outcomes. Finally, the enrichment for a fiscal block makes the model applicable for fiscal simulations.