Mathematical Models for Forecasting Unstable Economic Processes in the Eurozone

Askar Akaev, Alexander Zvyagintsev, Tessaleno Devezas, Askar Sarygulov and Andrea Tick
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Askar Akaev: Institute of Complex Systems Mathematical Research, Moscow State University, Leninskie Gory 1, Moscow 119234, Russia
Alexander Zvyagintsev: Mikhailovskaya Military Artillery Academy, Ulitsa Komsomola 22, St. Petersburg 195009, Russia
Tessaleno Devezas: Engineering Department, Atlantica Universitary Institute, Fábrica da Pólvora de Barcarena, 2730-036 Barcarena, Portugal
Askar Sarygulov: Center for Interdisciplinary Research and Education on Technological and Economic Problems of Energy Transition (CIRETEC-CT), Peter the Great St. Petersburg Polytechnic University, Ulitsa Politechnicheskaya 29, St. Petersburg 195251, Russia

Mathematics, 2023, vol. 11, issue 21, 1-14

Abstract: In an unstable economic climate, all market participants want to know is when is the timing to overcome a recession, and what measures and means to use for economic recovery. In this regard, the process through which the Eurozone economy has gained momentum since the summer of 2022 has been a volatile one. This was reflected in a sharp rise in the price level, followed by a sharp rise in the ECB interest rates. The purpose of this paper is to provide short-term forecasts of the main parameters of monetary and fiscal policy by the euro area monetary authorities, based on a model developed by the authors. The distinctive feature of the presented and proposed model lies in the particularly careful selection of the parameter values based on actual statistical data. The statistics used for the proposed model cover the period from 2015 to December 2022. The simulation results show that the European Central Bank (ECB) needs to maintain a policy of high interest rates for a period of 12 to 14 months, which will help to bring inflation down to 2–3 percent in the future and move to a stage and phase of sustainable economic growth.

Keywords: inflation; interest rate; Kagan demand function; Lucas supply equation; mathematical model; unstable economics (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
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