Macroeconometric Modelling with a Global Perspective

By M. Pesaran, Ron P. Smith, Cesifo Working, V. Smith. Social Science Research Network, 2006

209 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d01e1207a013e7de9ca0389b1862ef07bf5ee7c2

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Sandra Eickmeier
2. T. Ng
3. S. Holly
4. Marco del Negro
5. Mardi Dungey
6. J. Chadha
7. Pesaran
8. Ron P. Smith

In Finance

1. T. Ng
2. Sandra Eickmeier
3. Marco del Negro
4. Mardi Dungey
5. J. Chadha
6. Pesaran
7. Ron P. Smith
8. Mark P. Taylor

Citations in the corpus

• Theory and Practice of GVAR Modeling (2016, unknown): “Fortunately, an open source toolbox developed by Smith and Galesi (2014) together with a global macroeconomic dataset can be obtained from the web at: https://sites.”
• How Do Credit Supply Shocks Propagate Internationally? A Gvar Approach (2015, methodology): “Following Pesaran and Smith (2006), it is assumed that the are I(1) weakly exogenous with respect to the parameters of the VARX model.”
• Financial Crisis, US Unconventional Monetary Policy and International Spillovers (2015, unknown): “…15 since the LSAP1 program included an important component of private asset purchases (i.e. agency debt and agency MBS) 11 Examples include Pesaran and Smith (2006) and Dees, di Mauro, Smith and Pesaran (2007), where the 90 percent bootstrapped error bands around the mean estimates of…”
• What if the UK or Sweden had joined the Euro in 1999? An empirical evaluation using a global VAR (2007, methodology): “,H where μh is given by (13) and ξ ∗ T+h is the random variable defined by the probability distribution of ξT+h conditional on (IH̄⊗Ψ)ξ̃H̄= g̃H̄ .”