A common model approach to macroeconomics: using panel data to reduce sampling error

William Gavin () and Athena T. Theodorou

No 2003-045, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Is there a common model inherent in macroeconomic data? Macroeconomic theory suggests that market economies of various nations should share many similar dynamic patterns; as a result, individual-country empirical models, for a wide variety of countries often include the same variables. Yet, empirical studies often find important roles for idiosyncratic shocks in the differing macroeconomic performance of countries. We use forecasting criteria to examine the macro-dynamic behavior of 15 OECD countries in terms of a small set of familiar, widely?used core economic variables, omitting country-specific shocks. We find this small set of variables and a simple VAR ?common model? strongly supports the hypothesis that many industrialized nations have similar macroeconomic dynamics.

Keywords: time series analysis; Forecasting (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

Published in Journal of Forecasting, April 2005, 24(3), pp. 203-19

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Journal Article: A common model approach to macroeconomics: using panel data to reduce sampling error (2005)
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DOI: 10.20955/wp.2003.045

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