Central Bank of Nicaragua publishes Volume 12 of its Economics and Finance Journal covering inflation forecasting, credit booms and credit-cycle dynamics

The Central Bank of Nicaragua has published Volume 12 of its Economics and Finance Journal, compiling research produced by participants in the 2024 Economy, Finance and Development Prize and by central bank staff as part of the bank’s research agenda. The volume presents new empirical findings on inflation forecasting methods, credit boom identification, the distributional effects of progressive taxation, macroeconomic impacts of terms-of-trade shocks, and the interaction between loan-loss provisions and the credit cycle. On inflation forecasting, one study compares product-level models, machine learning techniques and a counterfactual approach based on external expectations, finding the counterfactual approach more accurate over short and medium horizons, machine learning robust across horizons, and product-level models useful for very short-term forecasts. A multi-method econometric assessment of Nicaragua’s credit booms over 2002–2025 identifies two main episodes, 2005–2008 and 2015–2018. Other papers find that progressive taxation reduces income and consumption gaps in a heterogeneous-agent dynamic stochastic general equilibrium framework; terms-of-trade shocks explain up to 27% of GDP variability and generate transitory expansions; and the provisioning framework appears procyclical in a structural vector autoregression over 2004–2024, amplifying credit-cycle volatility and motivating the use of countercyclical macroprudential instruments.