Macroeconometric Modelling with a Global Perspective

M Hashem Pesaran () and Ronald Smith ()

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

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 to their foreign counterparts and then consistently combined to form a Global VAR (GVAR). It is shown that 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. Similarly, short-run over-identifying theoretical restrictions can be tested and imposed if accepted. The assumption of the weak exogeneity of the foreign variables for the long-run parameters can be tested, where foreign 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.

Keywords: Global VAR (GVAR); DSGE models; VARX* (search for similar items in EconPapers)
JEL-codes: C32 E17 F37 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-int and nep-mac
Date: 2006-02
Note: Em
View list of references View citations in EconPapers

Downloads: (external link)
http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe0604.pdf (application/pdf)

Related works:
Working Paper: Macroeconometric Modelling with a Global Perspective (2006)
Working Paper: Macroeconometric Modelling with a Global Perspective (2006)
Journal Article: MACROECONOMETRIC MODELLING WITH A GLOBAL PERSPECTIVE (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:0604

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Series data maintained by Howard Cobb ().