Since the start of European monetary union, the macroeconomic situation in Germany can in many respects only be analyzed in combination with the situation in the rest of the euro area. To take this into account, a small macroeconometric model is constructed that models the euro area as consisting of two regions, Germany and the rest of the euro area. The rest of the world is treated as exogenous. Given problems with modelling the relevant relationships in a standard vector autoregression approach, the model is set up as a dynamic simultaneous equations model. The model is used to study the impact of monetary policy or of exchange rate changes on economic activity in Germany and the euro area.
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1204.
Find related papers by JEL classification: E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation
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