Forecasting regional growth: the MASST model

Nowadays, forecasting regional growth is not possible without taking into account the recent economic dynamics at national and supranational level. In fact, the particular focus of the European Union on sovereign debts and deficits imposed by the economic slowdown, the macroeconomic trends that emerged as a result of the crisis and, last but not least, new politically sensible decisions concerning the future of the European Union play a role in explaining the remarkable industrial and geographic heterogeneity in the response to the crisis and the persistence of some of the contraction-induced effects in some countries and regions. All this introduces complexity in the way regional economic growth can be modelled for forecasting purposes. The MASST model is a regional econometric growth model built to simulate regional growth scenarios in the medium and long run (typically, over a 15–20‑year time horizon), taking into consideration also macroeconomic aspects; in its estimation step, in fact, it explains regional growth as the result of national macroeconomic trends and regional growth assets at the same time. This paper aims to present the model and its interpretative power by merging national macroeconomic trends and the long-term regional structure. Particular emphasis will be given to the outcomes of two recent simulations for Polish regions.