Economic Policy Modelling Hub

The main objective of the project is the development of current state-of-the-art models/tools for evaluating and studying the impact of economic policies/reforms that play an important role in economic policy-making, both by the public sector and by other organizations, as well as in monitoring and control of applied policies and new growth models.

The investment will be comprised of 3 actions:

• Action 1: Economic Policy Modelling Hub at the Economics Research Centre: New Models, Tools, and Data for Economic Policy Analysis and Evaluation.
• Action 2: Transfer knowledge and training of public sector employees at the Ministry of Finance. Upgrade the public sector tools and skills for economic policy analysis and evaluation (e.g. economic impact assessments, economic evaluation and monitoring of reforms).
• Action 3: Development of big data and data analytics (collection and linkages of different databases in collaboration with the government) for informing and monitoring economic policies, especially in real-time, also useful for modelling, nowcasting and forecasting.

Scientific Team appointed at the Modelling Hub for Economic Policy Analysis

The scientific team appointed at the Modelling Hub for Economic Policy Analysis at the Economics Research Centre (CypERC) of the University of Cyprus includes experts in econometrics, macroeconometric modelling, economists, and data scientists/analysts. The team of experts includes academics and researchers from think-tanks like the European Commission’s Joint Research Centre and academic institutions like the University of Cyprus and other universities in Europe, the UK, and the US, as well as expert macroeconomists from the Central Bank of Cyprus and the University of Cyprus.

Improve Economic Policymaking and Implementation

The project has developed several important models and tools, such as the Input-Output Models, the Small Scale DSGE Models for the Cyprus Economy, Factor Models, and the Vector AutoRegressive Models, among others, which have been used for various applications including economic impact assessment analysis. These models have already been used for the Economic Impact Assessment of the RRP and have also been used for the economic impact assessment of the THALIA Structural Funds, of the impact of the recent sanctions on the Cyprus economy, the value added of the tourism sector in the Cyprus GDP, and the impact of climate indicators on economic growth. The applications and results of such projects have been useful to the Ministry of Finance for various policy purposes including communicating the impact of RRP and structural funds to the EC. Lastly, in developing tools for big data and data analytics, the CypERC has developed and estimated a monthly Inflation Indicator for Cyprus based on monthly frequency of a large dataset of publicly available website data, a Macroeconomic Uncertainty Indicator based on large panels of macroeconomic indicators, and a Composite Leading Economic Indicator for Cyprus using historical and real-time data of mixed frequencies.

It is noted that significant progress has been made with regards to the alternative models developed by the Economic Policy Modelling Hub. The various models have been specified, estimated, tested, and applied for various economic policy questions relevant for the Cyprus and European economies. Importantly, the value and usefulness of these models is evident through the various economic policy applications examples, while the applications and results of such projects have been useful to the Government for various policy purposes.