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A VECX* Model of the Swiss Economy

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  • Assenmacher-Wesche, K.
  • Pesaran, M.H.

Abstract

This paper applies the modelling strategy of Garratt, Lee, Pesaran and Shin (2003) to the estimation of a structural cointegrated VAR model that relates the core macroeconomic variables of the Swiss economy to current and lagged values of a number of key foreign variables. We identify and test a long-run structure between the variables. Moreover, we analyse the dynamic properties of the model using Generalised Impulse Response Functions. In its current form the model can be used to produce forecasts for the endogenous variables either under alternative specifications of the marginal model for the exogenous variables, or conditional on some pre-specified path of those variables (for scenario forecasting). In due course the Swiss VECX* model can also be integrated within a Global VAR (GVAR) model where the foreign variables of the model are determined endogenously.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0809.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0809.

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Length: 24
Date of creation: Feb 2008
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Handle: RePEc:cam:camdae:0809

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Web page: http://www.econ.cam.ac.uk/index.htm

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Keywords: Long-run structural vector autoregression.;

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References

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  1. M. Hashem Pesaran & Ron Smith, 2006. "Macroeconometric Modelling With A Global Perspective," Manchester School, University of Manchester, vol. 74(s1), pages 24-49, 09.
  2. Katrin Assenmacher-Wesche & M. Hashem Pesaran, 2008. "Forecasting the Swiss Economy Using Vecx* Models: an Exercise in Forecast Combination Across Models and Observation Windows," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 203(1), pages 91-108, January.
  3. Pesaran, M.H. & Shin, Y., 1993. "Cointegration and Speed of Convergence to Equilibrium," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9311, Faculty of Economics, University of Cambridge.
  4. Kilian, Lutz, 2001. "Impulse Response Analysis in Vector Autoregressions with Unknown Lag Order," Journal of Forecasting, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(3), pages 161-79, April.
  5. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1997. "Structural Analysis of Vector Error Correction Models with Exogenous I(1) Variables," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9706, Faculty of Economics, University of Cambridge.
  6. Garratt, Anthony & Lee, Kevin & Pesaran, M. Hashem & Shin, Yongcheol, 2012. "Global and National Macroeconometric Modelling: A Long-Run Structural Approach," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199650460, October.
  7. M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2002. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 01-38, Wharton School Center for Financial Institutions, University of Pennsylvania.
  8. Dees, S. & di Mauro, F. & Pesaran, M.H. & Smith, L.V., 2005. "Exploring the International Linkages of the Euro Area: a Global VAR Analysis," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0518, Faculty of Economics, University of Cambridge.
  9. Pagan, A.R. & Pesaran, M. Hashem, 2008. "Econometric analysis of structural systems with permanent and transitory shocks," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 32(10), pages 3376-3395, October.
  10. Garratt, A. & Lee, K. & Pesaran, M. H. & Shin, Y., 1998. "A Long-run Structural Macro-econometric Model of the UK," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9812, Faculty of Economics, University of Cambridge.
  11. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 119-147, September.
  12. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 2(2), pages 306-333.
  13. Strøm,Steinar (ed.), 1999. "Econometrics and Economic Theory in the 20th Century," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521633659.
  14. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, Elsevier, vol. 58(1), pages 17-29, January.
  15. Strøm,Steinar (ed.), 1999. "Econometrics and Economic Theory in the 20th Century," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521633239.
  16. Kongsted, Hans Christian, 2005. "Testing the nominal-to-real transformation," Journal of Econometrics, Elsevier, Elsevier, vol. 124(2), pages 205-225, February.
  17. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 813-36, July.
  18. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  19. Ho, Mun S & Sorensen, Bent E, 1996. "Finding Cointegration Rank in High Dimensional Systems Using the Johansen Test: An Illustration Using Data Based Monte Carlo Simulations," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 726-32, November.
  20. Lee, Kevin C. & Pesaran, M. Hashem, 1993. "Persistence profiles and business cycle fluctuations in a disaggregated model of U.K. output growth," Ricerche Economiche, Elsevier, Elsevier, vol. 47(3), pages 293-322, September.
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Citations

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Cited by:
  1. Assenmacher-Wesche, Katrin & Pesaran, M. Hashem, 2007. "Assessing Forecast Uncertainties in a VECX Model for Switzerland: An Exercise in Forecast Combination across Models and Observation Windows," IZA Discussion Papers 3071, Institute for the Study of Labor (IZA).
  2. Petra Gerlach-Kristen, 2006. "A Two-Pillar Phillips Curve for Switzerland," Working Papers 2006-09, Swiss National Bank.
  3. Chan, Tze-Haw, 2011. "A structural modeling of exchange rate, prices and interest rates between Malaysia-China in the liberalization era," MPRA Paper 32955, University Library of Munich, Germany.
  4. Katrin Assenmacher-Wesche & M. Hashem Pesaran, 2008. "Forecasting the Swiss Economy Using Vecx* Models: an Exercise in Forecast Combination Across Models and Observation Windows," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 203(1), pages 91-108, January.
  5. Hadi Salehi Esfahani & Kamiar Mohaddes & M. Hashem Pesaran, 2010. "Oil Exports and the Iranian Economy," Working Papers, Economic Research Forum 534, Economic Research Forum, revised Jul 2010.
  6. Chan, Tze-Haw, 2012. "Assessing the international parity conditions and transmission mechanism for Malaysia-China," MPRA Paper 38930, University Library of Munich, Germany.

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