Macroeconometric modelling with a global perspective

Arbeitspapier

This paper provides a synthesis and further development of a global modelling approach introduced in Pesaran, Schuermann and Weiner (2004), where country specific models in the form of VARX* structures are estimated relating a vector of domestic variables, xit, to their foreign counterparts, x*it, and then consistently combined to form a Global VAR (GVAR). It is shown that the VARX* models can be derived as the solution to a dynamic stochastic general equilibrium (DSGE) model where over-identifying long-run theoretical relations can be tested and imposed if acceptable. This gives the system a transparent long-run theoretical structure. Similarly, short-run over-identifying theoretical restrictions can be tested and imposed if accepted. Alternatively, if one has less confidence in the short-run theory the dynamics can be left unrestricted. The assumption of the weak exogeneity of the foreign variables for the long-run parameters can be tested, where x*it variables can be interpreted as proxies for global factors. Rather than using deviations from ad hoc statistical trends, the equilibrium values of the variables reflecting the long-run theory embodied in the model can be calculated. This approach has been used in a wide variety of contexts and for a wide variety of purposes. The paper also provides some new results.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1659

Classification and Topics

• Classification: Wirtschaft ; International Policy Coordination and Transmission ; International Finance Forecasting and Simulation: Models and Applications ; General Aggregative Models: Forecasting and Simulation: Models and Applications ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: Global VAR (GVAR) ; DSGE models ; VARX ; Ökonometrisches Makromodell ; CGE-Modelling ; VAR-Modell ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pesaran, Mohammad Hashem ; Smith, Ron P.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/19123
• Last update: 10.03.2025, 11:43 AM CET