IDEAS home Printed from https://ideas.repec.org/
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

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

    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.

    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

    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/

    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. Nicoletta Batini & Richard Harrison & Stephen P. Millard, 2001. "Monetary policy rules for an open economy," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    2. 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.
    3. Stock, J.H. & Watson, M.W., 1989. "New Indexes Of Coincident And Leading Economic Indicators," Papers 178d, Harvard - J.F. Kennedy School of Government.
    4. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
    5. 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.
    6. Laurence Ball, 1998. "Policy Rules for Open Economies," NBER Working Papers 6760, National Bureau of Economic Research, Inc.
    7. Edward Nelson & Kalin Nikolov, 2002. "Monetary policy and stagflation in the UK," Bank of England working papers 155, Bank of England.
    8. repec:cup:cbooks:9780521634809 is not listed on IDEAS
    9. Jens R. Clausen & Carsten-Patrick Meier, 2003. "Did the Bundesbank Follow a Taylor Rule? An Analysis Based on Real-Time Data," Kiel Working Papers 1180, Kiel Institute for the World Economy.
    10. Bennett T. McCallum & Edward Nelson, 1999. "Performance of Operational Policy Rules in an Estimated Semiclassical Structural Model," NBER Chapters, in: Monetary Policy Rules, pages 15-56 National Bureau of Economic Research, Inc.
    11. 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.
    12. 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.
    13. Peter Tinsley & Sharon Kozicki, 2003. "Alternative Sources of the Lag Dynamics of Inflation," Computing in Economics and Finance 2003 92, Society for Computational Economics.
    14. 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, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    15. 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.
    16. Hamid Faruqee & Douglas Laxton & Bart Turtelboom & Peter Isard & Eswar Prasad, 1998. "Multimod Mark III; The Core Dynamic and Steady State Model," IMF Occasional Papers 164, International Monetary Fund.
    17. Andrew Rennison, 2003. "Comparing Alternative Output-Gap Estimators: A Monte Carlo Approach," Working Papers 03-8, Bank of Canada.
    18. 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.
    19. Smets, Frank, 2000. "What horizon for price stability," Working Paper Series 0024, European Central Bank.
    20. Andrew G. Haldane & Nicoletta Batini, 1998. "Forward-Looking Rules for Monetary Policy," NBER Working Papers 6543, National Bureau of Economic Research, Inc.
    21. 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.
    22. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
    23. Paul De Grauwe & Cláudia Costa Storti, 2004. "The Effects of Monetary Policy: A Meta-Analysis," CESifo Working Paper Series 1224, CESifo Group Munich.
    24. Jens D J Larsen & Jack McKeown, 2004. "The informational content of empirical measures of real interest rate and output gaps for the United Kingdom," Bank of England working papers 224, Bank of England.
    25. 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.
    26. Rafael Domenech & Mayte Ledo & David Taguas, 2001. "A Small Forward-Looking Macroeconomic Model for EMU," Working Papers 0102, BBVA Bank, Economic Research Department.
    27. M Artis, 2002. "Dating the Business Cycle in Britain," Centre for Growth and Business Cycle Research Discussion Paper Series 17, Economics, The Univeristy of Manchester.
    28. 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.
    29. 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.
    30. 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.
    Full references (including those not matched with items on IDEAS)

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

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.