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A VECX* model of the Swiss economy

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  • Katrin Assenmacher-Wesche
  • M. Hashem Pesaran

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 specifi cations of the marginal model for the exogenous variables, or conditional on some pre-specifi ed 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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Bibliographic Info

Paper provided by Swiss National Bank in its series Economic Studies with number 2009-06.

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Length: 53 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:snb:snbecs:2009-06

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Keywords: Long-run structural vector autoregression;

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References

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  1. Strøm,Steinar (ed.), 1999. "Econometrics and Economic Theory in the 20th Century," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521633659.
  2. Filippo di Mauro & L. Vanessa Smith & Stephane Dees & M. Hashem Pesaran, 2007. "Exploring the international linkages of the euro area: a global VAR analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 22(1), pages 1-38.
  3. M. Hashem Pesaran & Ron P. Smith, 2006. "Macroeconometric Modelling with a Global Perspective," CESifo Working Paper Series, CESifo Group Munich 1659, CESifo Group Munich.
  4. 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.
  5. Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9710, Faculty of Economics, University of Cambridge.
  6. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0130, National Bureau of Economic Research, Inc.
  7. Strøm,Steinar (ed.), 1999. "Econometrics and Economic Theory in the 20th Century," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521633239.
  8. Katrin Assenmacher-Wesche & M. Hashem Pesaran, 2008. "Forecasting the Swiss Economy Using VECX* Models: An Exercise in Forecast Combination Across Modelsand Observation Windows," Working Papers, Swiss National Bank 2008-03, Swiss National Bank.
  9. 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.
  10. 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.
  11. A Garratt & K Lee & M Pesaran & Yongcheol Shin, 2004. "A long run structural macroeconometric model of the UK," ESE Discussion Papers, Edinburgh School of Economics, University of Edinburgh 35, Edinburgh School of Economics, University of Edinburgh.
  12. 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.
  13. Kongsted, Hans Christian, 2005. "Testing the nominal-to-real transformation," Journal of Econometrics, Elsevier, Elsevier, vol. 124(2), pages 205-225, February.
  14. 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.
  15. Adrian R. Pagan & M. Hashem Pesaran, 2008. "Econometric Analysis of Structural Systems with Permanent and Transitory Shocks," Discussion Papers, School of Economics, The University of New South Wales 2008-04, School of Economics, The University of New South Wales.
  16. 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.
  17. 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.
  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. 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.
  20. 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.
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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. 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.
  3. 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.
  4. Petra Gerlach-Kristen, 2007. "A Two-Pillar Phillips Curve for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 143(IV), pages 425-448, December.
  5. Esfahani, Hadi Salehi & Mohaddes, Kamiar & Pesaran, M. Hashem, 2009. "Oil Exports and the Iranian Economy," IZA Discussion Papers 4537, Institute for the Study of Labor (IZA).
  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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