Advanced Search
MyIDEAS: Login to save this paper or follow this series

Launching the NEUQ: The New European Union Quarterly Model, A Small Model of the Euro Area and U.K. Economies

Contents:

Author Info

  • Anna Piretti
  • Charles St-Arnaud
Registered author(s):

    Abstract

    The authors develop a projection model of the euro area and the United Kingdom. The model consists of two country blocks, endogenous to each other via the foreign demand channel. Each country block features an aggregate IS curve, a forward-looking Phillips curve, and an estimated forward-looking monetary policy reaction function. Potential output is estimated by means of a Hodrick-Prescott filter, conditioned by an equilibrium path generated by a structural vector autoregression (Rennison 2003 and Gosselin and Lalonde 2002). The Phillips curve is specified in terms of the output gap, and inflation dynamics are described by the polynomial adjustment cost (PAC) approach, as in Kozicki and Tinsley (2002). The model delivers relatively accurate projections at a variety of forecast horizons and provides a useful tool for policy analysis. The authors' simulation results suggest that output and inflation exhibit a greater degree of persistence to shocks in the euro area than in the United Kingdom.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp06-22.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Bank of Canada in its series Working Papers with number 06-22.

    as in new window
    Length: 53 pages
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:bca:bocawp:06-22

    Contact details of provider:
    Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
    Phone: 613 782-8845
    Fax: 613 782-8874
    Web page: http://www.bank-banque-canada.ca/

    Related research

    Keywords: Economic models; Business fluctuations and cycles;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Sharon Kozicki & P.A. Tinsley, 2002. "Alternative sources of the lag dynamics of inflation," Research Working Paper RWP 02-12, Federal Reserve Bank of Kansas City.
    2. Rafael Domenech & Mayte Ledo & David Taguas, 2001. "A Small Forward-Looking Macroeconomic Model for EMU," Working Papers 0102, BBVA Bank, Economic Research Department.
    3. Estrella, Arturo & Hardouvelis, Gikas A, 1991. " The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, vol. 46(2), pages 555-76, June.
    4. K.S.E.M. Hubrich & P.J.G. Vlaar, 2000. "Germany and the euro area: differences in the transmission process of monetary policy," WO Research Memoranda (discontinued) 613, Netherlands Central Bank, Research Department.
    5. Hamid Faruqee & Douglas Laxton & Bart Turtelboom & Peter Isard & Eswar Prasad, 1998. "Multimod Mark III," IMF Occasional Papers 164, International Monetary Fund.
    6. Batini, Nicoletta & Harrison, Richard & Millard, Stephen P., 2003. "Monetary policy rules for an open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11), pages 2059-2094.
    7. Nelson, Edward & Nikolov, Kalin, 2004. "Monetary Policy and Stagflation in the UK," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 293-318, June.
    8. Jens D J Larsen & Jack McKeown, 2003. "The informational content of empirical measures of real interst rate and output gaps for the United Kingdom," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 414-442 Bank for International Settlements.
    9. van Bergeijk, Peter A. G. & Berk, Jan Marc, 2000. "Is the yield curve a useful Information variable for the Eurosystem?," Working Paper Series 0011, European Central Bank.
    10. Laurence M. Ball, 1999. "Policy Rules for Open Economies," NBER Chapters, in: Monetary Policy Rules, pages 127-156 National Bureau of Economic Research, Inc.
    11. Ng, S. & Perron, P., 1994. "Unit Root Tests ARMA Models with Data Dependent Methods for the Selection of the Truncation Lag," Cahiers de recherche 9423, Universite de Montreal, Departement de sciences economiques.
    12. Paul De Grauwe & Cláudia Costa Storti, 2004. "The Effects of Monetary Policy: A Meta-Analysis," CESifo Working Paper Series 1224, CESifo Group Munich.
    13. Carlo Altavilla & Luigi Landolfo, 2005. "Do central banks act asymmetrically? Empirical evidence from the ECB and the Bank of England," Applied Economics, Taylor & Francis Journals, vol. 37(5), pages 507-519.
    14. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July.
    15. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers 178d, Harvard - J.F. Kennedy School of Government.
    16. Bennett T. McCallum & Edward Nelson, 1998. "Performance of operational policy rules in an estimated semi-classical structural model," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    17. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
    18. Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, vol. 90(3), pages 367-390, June.
    19. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
    20. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
    21. Nicoletta Batini & Andrew G Haldane, 1999. "Forward-looking rules for monetary policy," Bank of England working papers 91, Bank of England.
    22. Jens R. Clausen & Carsten-Patrick Meier, 2003. "Did the Bundesbank Follow a Taylor Rule? An Analysis Based on Real-Time Data," IWP Discussion Paper Series 02/2003, Institute for Economic Policy, Cologne, Germany.
    23. Andrew Rennison, 2003. "Comparing Alternative Output-Gap Estimators: A Monte Carlo Approach," Working Papers 03-8, Bank of Canada.
    24. Smets, Frank, 2000. "What horizon for price stability," Working Paper Series 0024, European Central Bank.
    25. Issing, O., 2004. "The role of macroeconomic projections within the monetary policy strategy of the ECB," Economic Modelling, Elsevier, vol. 21(5), pages 723-734, September.
    26. Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521634809, April.
    27. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    28. Libero Monteforte, 2004. "Aggregation bias in macro models: does it matter foir the euro area?," Temi di discussione (Economic working papers) 534, Bank of Italy, Economic Research and International Relations Area.
    29. Jack McKeown & Jens McKeown, 2004. "The informational content of empirical measures of real interest rate and output gaps for the United Kingdom," Money Macro and Finance (MMF) Research Group Conference 2003 62, Money Macro and Finance Research Group.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Rene Lalonde & Dirk Muir, 2007. "The Bank of Canada's Version of the Global Economy Model (BoC-GEM)," Technical Reports 98, Bank of Canada.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:06-22. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.