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A common model approach to macroeconomics: using panel data to reduce sampling error

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Author Info
William T. Gavin (Federal Reserve Bank of St. Louis, USA)
Athena T. Theodorou (Federal Reserve Bank of St. Louis, USA)

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Abstract

Is there a common model inherent in macroeconomic data? Macroeconomic theory suggests that market economies of various nations should share many similar dynamic patterns; as a result, individual country empirical models, for a wide variety of countries, often include the same variables. Yet, empirical studies often find important roles for idiosyncratic shocks in the differing macroeconomic performance of countries. We use forecasting criteria to examine the macrodynamic behaviour of 15 OECD countries in terms of a small set of familiar, widely used core economic variables, omitting country-specific shocks. We find this small set of variables and a simple VAR 'common model' strongly support the hypothesis that many industrialized nations have similar macroeconomic dynamics. Copyright © 2005 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.954
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 24 (2005)
Issue (Month): 3 ()
Pages: 203-219
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:jof:jforec:v:24:y:2005:i:3:p:203-219

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Canova, Fabio & Ciccarelli, Matteo, 2004. "Forecasting and turning point predictions in a Bayesian panel VAR model," Journal of Econometrics, Elsevier, vol. 120(2), pages 327-359, June. [Downloadable!] (restricted)
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  2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  3. David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
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  4. Canova, Fabio, 2002. "G-7 Inflation Forecasts," CEPR Discussion Papers 3283, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Fabio Canova, 2002. "G-7 inflation forecasts," Working Paper Series 151, European Central Bank. [Downloadable!]
  6. Michael D. Bordo & John Landon Lane & Angela Redish, 2004. "Good versus Bad Deflation: Lessons from the Gold Standard Era," NBER Working Papers 10329, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Thomas Doan & Robert Litterman & Christopher Sims, 1984. "Forecasting and conditional projection using realistic prior distributions," Econometric Reviews, Taylor and Francis Journals, vol. 3(1), pages 1-100. [Downloadable!] (restricted)
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  9. Fiorito, Riccardo & Kollintzas, Tryphon, 1994. "Stylized facts of business cycles in the G7 from a real business cycles perspective," European Economic Review, Elsevier, vol. 38(2), pages 235-269, February. [Downloadable!] (restricted)
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  10. Thursby, Jerry G., 1987. "OLS or GLS in the presence of specification error? : An expected loss approach," Journal of Econometrics, Elsevier, vol. 35(2-3), pages 359-374, July. [Downloadable!] (restricted)
  11. James H. Stock & Mark W. Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
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  12. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tuomas A. Peltonen & Ricardo M. Sousa & Isabel S. Vansteenkiste, 2009. "Fundamentals, Financial Factors and The Dynamics of Investment in Emerging Markets," NIPE Working Papers 19/2009, NIPE - Universidade do Minho. [Downloadable!]
  2. William T. Gavin & David M. Kemme, 2007. "Using extraneous information to analyze monetary policy in transition economies," Working Papers 2004-034, Federal Reserve Bank of St. Louis. [Downloadable!]
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  3. Badi H. Baltagi, 2007. "Forecasting with Panel Data," Center for Policy Research Working Papers 91, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
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