This paper presents the structural macroeconomic model, NECMOD, which was developed foremost to facilitate implementation of the monetary policy in Poland through a regular delivery of inflation and GDP projections. It encompasses all major channels of the monetary policy transmission mechanism and is able to deliver a comprehensive explanation of factors underlying the main economic developments. With its complex labour market structure, explicitly specified inflation expectations, distortionary fiscal policy and heterogeneity of the capital stock, it is able to accurately describe propagation of a range of macroeconomic shocks. As a forecasting and simulation tool, the model is specifically designed to reflect the dynamic nature of a converging economy.