IDEAS home Printed from https://ideas.repec.org/p/esr/wpaper/wp553.html
   My bibliography  Save this paper

COSMO: A new COre Structural MOdel for Ireland

Author

Listed:
  • Bergin, Adele
  • Conroy, Niall
  • Garcia Rodriguez, Abian
  • Holland, Dawn
  • McInerney, Niall
  • Morgenroth, Edgar
  • Smith, Donal

Abstract

COSMO is a new structural econometric model of the Irish economy, with a theoretically founded structure and specification. It is designed to be used for medium-term economic projections and policy analysis. This paper outlines the key mechanisms in the model and explores the behaviour of the model by examining a range of shocks. One of the key contributions of COSMO is the incorporation of financial frictions in a small open economy model. The behavioural equations in COSMO are estimated econometrically, and the second contribution of the model relates to how all available information at both annual and quarterly frequency is exploited in estimation, applying a novel technique to convert dynamics estimated at one frequency into the other.

Suggested Citation

  • Bergin, Adele & Conroy, Niall & Garcia Rodriguez, Abian & Holland, Dawn & McInerney, Niall & Morgenroth, Edgar & Smith, Donal, 2017. "COSMO: A new COre Structural MOdel for Ireland," Papers WP553, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esr:wpaper:wp553
    as

    Download full text from publisher

    File URL: https://www.esri.ie/pubs/WP553.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Markus K. Brunnermeier & Yuliy Sannikov, 2014. "A Macroeconomic Model with a Financial Sector," American Economic Review, American Economic Association, vol. 104(2), pages 379-421, February.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. Moller Andersen, Frits & Celov, Dmitry & Grinderslev, Dorte & Kazlauskas, Arvydas, 2005. "A macro-econometric model of Lithuania LITMOD," Economic Modelling, Elsevier, vol. 22(4), pages 707-719, July.
    4. Iana Liadze & Professor E. Philip Davis, 2012. "Modelling and simulating the banking sectors of the US, Germany and the UK," National Institute of Economic and Social Research (NIESR) Discussion Papers 396, National Institute of Economic and Social Research.
    5. John V. Duca & John Muellbauer & Anthony Murphy, 2011. "House Prices and Credit Constraints: Making Sense of the US Experience," Economic Journal, Royal Economic Society, vol. 121(552), pages 533-551, May.
    6. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-248, April.
    7. David Duffy & Niall McInerney & Kieran McQuinn, 2016. "Macroprudential policy in a recovering property market: too much too soon?," European Journal of Housing Policy, Taylor and Francis Journals, vol. 16(4), pages 491-523, October.
    8. Frances Ruane & Iulia Siedschlag & Gavin Murphy, 2014. "Globalization and Ireland’s Export Performance," Palgrave Macmillan Books, in: Louis Brennan (ed.), Enacting Globalization, chapter 19, pages 205-216, Palgrave Macmillan.
    9. Daragh Clancy & Rossana Merola, 2016. "ÉIRE Mod: A DSGE Model for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(1), pages 1-31.
    10. John Whitley & Richard Windram, 2003. "A quantitative framework for commercial property and its relationship to the analysis of the financial stability of the corporate sector," Bank of England working papers 207, Bank of England.
    11. Nobili, Andrea & Zollino, Francesco, 2017. "A structural model for the housing and credit market in Italy," Journal of Housing Economics, Elsevier, vol. 36(C), pages 73-87.
    12. Bårdsen, Gunnar & den Reijer, Ard & Jonasson, Patrik & Nymoen, Ragnar, 2012. "MOSES: Model for studying the economy of Sweden," Economic Modelling, Elsevier, vol. 29(6), pages 2566-2582.
    13. James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 729-752.
    14. Andreou, Elena & Ghysels, Eric & Kourtellos, Andros, 2010. "Regression models with mixed sampling frequencies," Journal of Econometrics, Elsevier, vol. 158(2), pages 246-261, October.
    15. Robert Kelly & Eoin Brien & Rebecca Stuart, 2015. "A long-run survival analysis of corporate liquidations in Ireland," Small Business Economics, Springer, vol. 44(3), pages 671-683, March.
    16. Duffy, David & McQuinn, Kieran & Morley, Ciara & Foley, Daniel, 2016. "Quarterly Economic Commentary, Summer 2016," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20162.
    17. Clancy, Daragh & Merola, Rossana, 2014. "The effect of macroprudential policy on endogenous credit cycles," Research Technical Papers 15/RT/14, Central Bank of Ireland.
    18. Estrella, Arturo, 2004. "The cyclical behavior of optimal bank capital," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1469-1498, June.
    19. Iacoviello, Matteo & Pavan, Marina, 2013. "Housing and debt over the life cycle and over the business cycle," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 221-238.
    20. Reint Gropp & Florian Heider, 2010. "The Determinants of Bank Capital Structure," Review of Finance, European Finance Association, vol. 14(4), pages 587-622.
    21. Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and Banking in a DSGE Model of the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 107-141, September.
    22. Bradley, John & Fitzgerald, John, 1988. "Industrial output and factor input determination in an econometric model of a small open economy," European Economic Review, Elsevier, vol. 32(6), pages 1227-1241, July.
    23. Mr. Marco Marini, 2016. "Nowcasting Annual National Accounts with Quarterly Indicators: An Assessment of Widely Used Benchmarking Methods," IMF Working Papers 2016/071, International Monetary Fund.
    24. Duffy, David & FitzGerald, John & McQuinn, Kieran & Morley, Ciara, 2014. "Quarterly Economic Commentary, Summer 2014," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20142.
    25. Robert Kelly & Kieran McQuinn, 2014. "On the Hook for Impaired Bank Lending: Do Sovereign-Bank Interlinkages Affect the Net Cost of a Fiscal Stimulus?," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 95-128, September.
    26. Kenny, Geoff & Morgan, Julian, 2011. "Some lessons from the financial crisis for the economic analysis," Occasional Paper Series 130, European Central Bank.
    27. Kasimati, Evangelia & Dawson, Peter, 2009. "Assessing the impact of the 2004 Olympic Games on the Greek economy: A small macroeconometric model," Economic Modelling, Elsevier, vol. 26(1), pages 139-146, January.
    28. Louis N. Christofides & Andrew J. Oswald, 1992. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 985-1002.
    29. Mitchell, Peter R. & Sault, Joanne E. & Smith, Peter N. & Wallis, Kenneth F., 1998. "Comparing global economic models," Economic Modelling, Elsevier, vol. 15(1), pages 1-48, January.
    30. Mark Cassidy & Niamh Hallissey, 2016. "The Introduction of Macroprudential Measures for the Irish Mortgage Market," The Economic and Social Review, Economic and Social Studies, vol. 47(2), pages 271-297.
    31. Xavier Freixas & Jean-Charles Rochet, 2008. "Microeconomics of Banking, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062704, December.
    32. David Duffy & Niall McInerney & Kieran McQuinn, 2016. "Macroprudential policy in a recovering property market: too much too soon?," International Journal of Housing Policy, Taylor & Francis Journals, vol. 16(4), pages 491-523, October.
    33. Gertjan W. Vlieghe, 2001. "Indicators of fragility in the UK corporate sector," Bank of England working papers 146, Bank of England.
    34. Barrell, Ray & Pain, Nigel, 1997. "Foreign Direct Investment, Technological Change, and Economic Growth within Europe," Economic Journal, Royal Economic Society, vol. 107(445), pages 1770-1786, November.
    35. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-375, November.
    36. Ghysels, Eric, 2016. "Macroeconomics and the reality of mixed frequency data," Journal of Econometrics, Elsevier, vol. 193(2), pages 294-314.
    37. Bergin, Adele & Conefrey, Thomas & FitzGerald, John & Kearney, Ide & Znuderl, Nusa, 2013. "The HERMES-13 macroeconomic model of the Irish economy," Papers WP460, Economic and Social Research Institute (ESRI).
    38. Reamonn Lyndon & Yvonne McCarthy, 2013. "What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears," The Economic and Social Review, Economic and Social Studies, vol. 44(1), pages 117-150.
    39. Fagan, Gabriel & Henry, Jerome & Mestre, Ricardo, 2005. "An area-wide model for the euro area," Economic Modelling, Elsevier, vol. 22(1), pages 39-59, January.
    40. Josef Baumgartner & Fritz Breuss & Serguei Kaniovski, 2004. "WIFO-Macromod. An Econometric Model of the Austrian Economy," WIFO Working Papers 241, WIFO.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. McInerney, Niall, 2019. "Macroprudential Policy, Banking and the Real Estate Sector," MPRA Paper 91777, University Library of Munich, Germany.
    2. Clancy, Daragh & Merola, Rossana, 2014. "The effect of macroprudential policy on endogenous credit cycles," Research Technical Papers 15/RT/14, Central Bank of Ireland.
    3. Clancy, Daragh & Merola, Rossana, 2017. "Countercyclical capital rules for small open economies," Journal of Macroeconomics, Elsevier, vol. 54(PB), pages 332-351.
    4. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    5. Borio, Claudio & Zhu, Haibin, 2012. "Capital regulation, risk-taking and monetary policy: A missing link in the transmission mechanism?," Journal of Financial Stability, Elsevier, vol. 8(4), pages 236-251.
    6. Niall McInerney, 2016. "A Structural Model of Macroprudential Policy: the Case of Ireland," EcoMod2016 9643, EcoMod.
    7. Nobili, Andrea & Zollino, Francesco, 2017. "A structural model for the housing and credit market in Italy," Journal of Housing Economics, Elsevier, vol. 36(C), pages 73-87.
    8. Kennedy, Gerard & O'Brien, Eoin & Woods, Maria, 2016. "Assessing the sustainability of Irish residential property prices: 1980Q1-2016Q2," Economic Letters 11/EL/16, Central Bank of Ireland.
    9. McQuinn, Kieran, 2017. "Irish house prices: Déjà vu all over again?," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    10. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    11. Kelly, Robert & McCann, Fergal & O’Toole, Conor, 2018. "Credit conditions, macroprudential policy and house prices," Journal of Housing Economics, Elsevier, vol. 41(C), pages 153-167.
    12. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2019. "Credit Supply and the Housing Boom," Journal of Political Economy, University of Chicago Press, vol. 127(3), pages 1317-1350.
    13. Giacomo Carboni & Christoffer Kok & Matthieu Darrak Paries, 2014. "Exploring the Nexus Between Macro-Prudential Policies and Monetary Policy Measures: Evidence from an Estimated DSGE Model for the Euro Area," Working Papers BFI_2013-005, Becker Friedman Institute for Research In Economics.
    14. Kok, Christoffer & Gross, Marco & Żochowski, Dawid, 2016. "The impact of bank capital on economic activity - evidence from a mixed-cross-section GVAR model," Working Paper Series 1888, European Central Bank.
    15. Jensen, Henrik & Ravn, Søren Hove & Santoro, Emiliano, 2018. "Changing credit limits, changing business cycles," European Economic Review, Elsevier, vol. 102(C), pages 211-239.
    16. Matthieu Darracq Paries, 2018. "Financial frictions and monetary policy conduct," Erudite Ph.D Dissertations, Erudite, number ph18-01 edited by Ferhat Mihoubi, September.
    17. Tommaso Trani, 2012. "Countercyclical Capital Regulation and Bank Ownership Structure," IHEID Working Papers 14-2012, Economics Section, The Graduate Institute of International Studies.
    18. Kelly, Robert & O'Toole, Conor, 2016. "Lending Conditions and Loan Default: What Can We Learn From UK Buy-to-Let Loans?," Research Technical Papers 04/RT/16, Central Bank of Ireland.
    19. Kollmann, Robert & Enders, Zeno & Müller, Gernot J., 2011. "Global banking and international business cycles," European Economic Review, Elsevier, vol. 55(3), pages 407-426, April.
    20. Crowe, Christopher & Dell’Ariccia, Giovanni & Igan, Deniz & Rabanal, Pau, 2013. "How to deal with real estate booms: Lessons from country experiences," Journal of Financial Stability, Elsevier, vol. 9(3), pages 300-319.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:wp553. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Burns (email available below). General contact details of provider: https://edirc.repec.org/data/esriiie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.