These policy judgements are particularly sensitive in light of the significance of cross-border financial flows, and their impact on exchange rates and long term interest rates. As with many other central banks, the Reserve Bank developed a quantitative structural model (a dynamic stochastic equilibrium model) for forecasting purposes.
However, irrespective of the complexity of their models, all central bank models are at best rudimentary in their capacity to model the financial sector and integrate it into the real economy.