Exploring the International Linkages of the Euro Area: a Global VAR Analysis

Stephane Dees (), Filippo di Mauro (), M Hashem Pesaran () and L. Vanessa Smith

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We presents a global model linking individual country vector error-correcting models in which domestic variables are related to country-specific variables as an approximate solution to a global common factor model. The model is estimated for 26 economies. It provides a theoretical framework where the GVAR is derived as an approximation to a global unobserved common factor model, and using average pair-wise cross-section error correlations, the approach is shown to be quite effective in dealing with common factor interdependencies and international co-movements of business cycles. In addition to generalised impulse response functions, we propose an identification scheme to derive structural impulse responses. We focus on identification of shocks to the US economy, particularly the monetary policy shocks, and consider the time profiles of their effects on the euro area. To this end we include the US model as the first country model and consider alternative orderings of the US variables.

Keywords: Global VAR (GVAR); Global interdependencies; global macroeconomic modeling; impulse responses. (search for similar items in EconPapers)
JEL-codes: C32 E17 F47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2005-05
Note: EM
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Related works:
Working Paper: Exploring the International Linkages of the Euro Area: A Global VAR Analysis (2004)
Working Paper: Exploring the International Linkages of the Euro Area: a Global VAR Analysis (2005)
Working Paper: Exploring the international linkages of the euro area - a global VAR analysis (2005)
Working Paper: Exploring the International Linkages of the Euro Area: a Global VAR Analysis (2006)
Journal Article: Exploring the international linkages of the euro area: a global VAR analysis (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:0518

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