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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/19123
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| Title: | | Macroeconometric modelling with a global perspective  |
| Authors: | | Pesaran, Mohammad Hashem Smith, Ron P. |
| Issue Date: | | 2006 |
| Series/Report no.: | | CESifo working papers 1659 |
| Abstract: | | 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. |
| Subjects: | | Global VAR (GVAR) DSGE models VARX |
| JEL: | | F42 F37 E17 C32 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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