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A Small Quarterly Multi-Country Projection Model with Financial-Real Linkages and Oil Prices

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Author Info

  • Michel Juillard
  • Charles Freedman
  • Dmitry Korshunov
  • Douglas Laxton
  • Ondra Kamenik
  • Ioan Carabenciov
  • Igor Ermolaev
  • Jared Laxton

Abstract

This is the third of a series of papers that are being written as part of a larger project to estimate a small quarterly Global Projection Model (GPM). The GPM project is designed to improve the toolkit for studying both own-country and cross-country linkages. In this paper, we estimate a small quarterly projection model of the US, Euro Area, and Japanese economies that incorporates oil prices and allows us to trace out the effects of shocks to oil prices. The model is estimated with Bayesian techniques. We show how the model can be used to construct efficient baseline forecasts that incorporate judgment imposed on the near-term outlook.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/280.

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Length: 74
Date of creation: 01 Dec 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/280

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Related research

Keywords: Monetary policy; Economic forecasting; Oil prices; External shocks; Forecasting models; inflation; equation; forecasting; rate of inflation; equations; correlations; real interest rate; correlation; standard deviation; aggregate demand; survey; real interest rates; nominal interest rate; time series; stochastic processes; real exchange rates; standard deviations; rate of change; confidence intervals; inflation rate; inflationary pressures; projection period; increase in interest rates; inflation rates; calibration; price inflation; inflation equation; observable variable; high inflation; inflation target; samples; price level; rates of inflation; monetary economics; effective exchange rates; rational expectations; simultaneous equation; inflationary impact; integral; real output; relative prices; increase in inflation; nominal interest rates; random walk; measure of inflation; rise in inflation; inflation process;

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References

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  1. Juillard, Michael & Kamenik, Ondra & Kumhof, Michael & Laxton, Douglas, 2008. "Optimal price setting and inflation inertia in a rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2584-2621, August.
  2. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  3. David Laidler, 2003. "The Price Level, Relative Prices, and Economic Stability: Aspects of the Inter-War Debate," UWO Department of Economics Working Papers 200310, University of Western Ontario, Department of Economics.
  4. Tamim Bayoumi & Ola Melander, 2008. "Credit Matters," IMF Working Papers 08/169, International Monetary Fund.
  5. Eyal Argov & David Rose & Philippe D Karam & Natan P. Epstein & Douglas Laxton, 2007. "Endogenous Monetary Policy Credibility in a Small Macro Model of Israel," IMF Working Papers 07/207, International Monetary Fund.
  6. Athanasios Orphanides, 2003. "Historical monetary policy analysis and the Taylor rule," Finance and Economics Discussion Series 2003-36, Board of Governors of the Federal Reserve System (U.S.).
  7. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "A Practical Model-Based Approach to Monetary Policy Analysis: Overview," IMF Working Papers 06/80, International Monetary Fund.
  8. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  9. Cara S. Lown & Donald P. Morgan, 2002. "Credit effects in the monetary mechanism," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 217-235.
  10. Jared Laxton & Igor Ermolaev & Charles Freedman & Ondra Kamenik & Michel Juillard & Douglas Laxton & Ioan Carabenciov & Dmitry Korshunov, 2008. "A Small Quarterly Multi-Country Projection Model," IMF Working Papers 08/279, International Monetary Fund.
  11. Dennis P. J. Botman & David Rose & Douglas Laxton & Philippe D Karam, 2007. "DSGE Modeling At the Fund," IMF Working Papers 07/200, International Monetary Fund.
  12. Cara S. Lown & Donald P. Morgan & Sonali Rohatgi, 2000. "Listening to loan officers: the impact of commercial credit standards on lending and output," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 1-16.
  13. Tamim Bayoumi & Andrew Swiston, 2007. "Foreign Entanglements," IMF Working Papers 07/182, International Monetary Fund.
  14. Michel Juillard & Ondrej Kamenik & Michael Kumhof & Douglas Laxton, 2006. "Measures of Potential Output from an Estimated DSGE Model of the United States," Working Papers 2006/11, Czech National Bank, Research Department.
  15. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "Practical Model-Based Monetary Policy Analysis," IMF Working Papers 06/81, International Monetary Fund.
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Citations

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Cited by:
  1. Ricardo Cervantes & Phakawa Jeasakul & Joseph Maloney & Li Lian Ong, 2014. "Ms. Muffet, the Spider(gram) and the Web of Macro-Financial Linkages," IMF Working Papers 14/99, International Monetary Fund.
  2. Dées, Stéphane & Pesaran, Hashem & Smith, Vanessa & Smith, Ron P., 2010. "Supply, demand and monetary policy shocks in a multi-country New Keynesian Model," Working Paper Series 1239, European Central Bank.
  3. Makram El-Shagi & Sebastian Giesen, 2010. "Testing for Structural Breaks at Unknown Time: A Steeplechase," IWH Discussion Papers 19, Halle Institute for Economic Research.
  4. Patrick Blagrave & Peter Elliott & Roberto Garcia-Saltos & Douglas Hostland & Douglas Laxton & Fan Zhang, 2013. "Adding China to the Global Projection Model," IMF Working Papers 13/256, International Monetary Fund.
  5. Ioan Carabenciov & Charles Freedman & Roberto Garcia-Saltos & Douglas Laxton & Ondra Kamenik & Petar Manchev, 2013. "Gpm6," IMF Working Papers 13/87, International Monetary Fund.
    • Tamim Bayoumi & Hamid Faruqee & Douglas Laxton & Philippe D Karam & Alessandro Rebucci & Jaewoo Lee & Ben Hunt & Ivan Tchakarov, 2004. "Gem," IMF Occasional Papers 239, International Monetary Fund.
  6. Ruperto MAJUCA, 2013. "Managing Economic Shocks and Macroeconomic Coordination in an Integrated Region: ASEAN Beyond 2015," Working Papers DP-2013-18, Economic Research Institute for ASEAN and East Asia (ERIA).
  7. Giesen, Sebastian & Holtemöller, Oliver & Scharff, Juliane & Scheufele, Rolf, 2012. "The Halle Economic Projection Model," Economic Modelling, Elsevier, vol. 29(4), pages 1461-1472.
  8. Ashima Goyal & Sanchit Arora, 2013. "Estimating the Indian natural interest rate and evaluating policy," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-017, Indira Gandhi Institute of Development Research, Mumbai, India.

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