Econometric Models of the Euro-area Central Banks by Gabriel Fagan, Julian Morgan

By Gabriel Fagan, Julian Morgan

This ebook presents an outline of the most macroeconomic types utilized by the ecu valuable financial institution and the euro zone nationwide vital banks (Eurosystem). those types are used to aid arrange monetary projections and situation research for person international locations and the euro region as a complete. the quantity takes inventory of the present macroeconometric modelling infrastructure on hand in the Eurosystem, highlighting not just the constructions and major positive aspects of the versions used but in addition their reasons and underlying model-building philosophies. A 'bird's eye view' of the major info of the layout, constitution and features of the versions is equipped, besides details at the responses of those types to a sequence of ordinary financial and coverage shocks. this can be the 1st time finished description and systematic comparability of the most macroeconomic versions has been released. This ebook might be of significant curiosity to critical financial institution and govt economists, in addition to lecturers, economists and scholars with an curiosity in crucial banking, econometric modelling, forecasting and macroeconomic coverage.

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2003). A temporary fiscal policy shock, in which real government consumption would be permanently increased by 1 per cent of initial real GDP for five years. The adjustment should be spread proportionally across all elements of government consumption. Where models have different variables for government employment and government wages, the adjustment should take place in employment rather than wages. For comparability this shock should be fixed at 1 per cent of initial real GDP so that the shock does not increase in magnitude as baseline real GDP rises over the five years.

In the second and third years the impact on prices is still small in Austria, Ireland and Luxembourg, while the impact is consistently larger in Italy over this period. Berben et al. (2004) examined the reasons for differences in the estimated transmission of monetary policy on the basis of an earlier vintage of these simulations. In particular they considered the extent to which these differences are due to differences in the underlying economies or (possibly unrelated) differences in the modelling strategies adopted for each country.

Most models find a role for both income and wealth as long-run determinants of consumption. However long-run wealth effects are not present in the Greek, French and Portuguese models, while long-run income effects are not present in the Belgian or Irish models. In the Belgian case a long-run income effect enters via the human wealth variable, which is the discounted value of current and future income. Around half of the models have direct interest rate effects in consumption in order to account for direct intertemporal substitution effects.

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