The GVAR Handbook: Structure and Applications of a Macro Model of the Global Economy for Policy Analysis

299 Pages·2013·1.79 MB·English

by  Filippo di Mauro, M. Hashem Pesaran

The GVAR Handbook
This page intentionally left blank
The GVAR Handbook
Structure and Applications of a Macro
Model of the Global Economy for Policy
Analysis
Edited by
Filippo di Mauro & M. Hashem Pesaran
1
3
GreatClarendonStreet,Oxford,OX26DP,
UnitedKingdom
OxfordUniversityPressisadepartmentoftheUniversityofOxford.
ItfurtherstheUniversity’sobjectiveofexcellenceinresearch,scholarship,
andeducationbypublishingworldwide.Oxfordisaregisteredtrademarkof
OxfordUniversityPressintheUKandincertainothercountries
(cid:2)c OxfordUniversityPress2013
Themoralrightsoftheauthorshavebeenasserted
FirstEditionpublishedin2013
Impression:1
Allrightsreserved.Nopartofthispublicationmaybereproduced,storedin
aretrievalsystem,ortransmitted,inanyformorbyanymeans,withoutthe
priorpermissioninwritingofOxfordUniversityPress,orasexpresslypermitted
bylaw,bylicence,orundertermsagreedwiththeappropriatereprographics
rightsorganization.Enquiriesconcerningreproductionoutsidethescopeofthe
aboveshouldbesenttotheRightsDepartment,OxfordUniversityPress,atthe
addressabove
Youmustnotcirculatethisworkinanyotherform
andyoumustimposethissameconditiononanyacquirer
BritishLibraryCataloguinginPublicationData
Dataavailable
ISBN 978–0–19–967008–6
PrintedinGreatBritainby
MPGPrintgroup,UK
LinkstothirdpartywebsitesareprovidedbyOxfordingoodfaithand
forinformationonly.Oxforddisclaimsanyresponsibilityforthematerials
containedinanythirdpartywebsitereferencedinthiswork.
Contents
ListofFigures vii
ListofTables x
ListofContributors xii
1. Introduction:AnoverviewoftheGVARapproachand
thehandbook 1
FilippodiMauroandM.HashemPesaran
2. ThebasicGVARDdPSmodel 12
FilippodiMauroandL.VanessaSmith
PartI Internationaltransmissionandforecasting
3. GlobalrecessionsandoutputinterdependenciesinaGVAR
modelofactualandexpectedoutputintheG7 35
AnthonyGarratt,KevinLee,andKalvinderShields
4. TheGVARapproachtostructuralmodelling 56
RonP.Smith
5. Externalshocksandinternationalinflationlinkages 70
AlessandroGalesiandMarcoJ.Lombardi
6. Internationalbusinesscyclesandtheroleoffinancialmarkets 83
SandraEickmeierandTimNg
7. UsingglobalVARmodelsforscenario-basedforecastingand
policyanalysis 97
MatthewGreenwood-Nimmo,VietHoangNguyen,and
YongcheolShin
8. Short-andmedium-termforecastingusing‘pooling’
techniques 114
L.VanessaSmith
Contents
9. Nowcastingquarterlyeuro-areaGDPgrowthusingaglobal
VARmodel 131
SilviaLuiandJamesMitchell
PartII Financeapplications
10. MacroprudentialapplicationsoftheGVAR 151
AlexanderAl-HaschimiandStéphaneDées
11. Modellingsovereignbondspreadsintheeuroarea:anonlinear
globalVARmodel 166
CarloA.Favero
12. Theinternationalspilloveroffiscalspendingonfinancial
variables 182
ChristianeNickelandIsabelVansteenkiste
PartIII Regionalapplications
13. China’semergenceintheworldeconomyandbusinesscycles
inLatinAmerica 195
AmbrogioCesa-Bianchi,M.HashemPesaran,AlessandroRebucci,
andTengTengXu
14. Doesonesizefitall?Modellingmacroeconomiclinkagesinthe
WestAfricanEconomicandMonetaryUnion 212
DavidFielding,KevinLee,andKalvinderShields
15. Competitiveness,externalimbalances,andeconomic
linkagesintheeuroarea 231
StéphaneDées
16. ForecastingtheSwisseconomywithasmallGVARmodel 244
KatrinAssenmacher
17. RegionalfinancialspilloversacrossEurope 255
AlessandroGalesiandSilviaSgherri
18. Conclusion 267
Index 271
vi
List of Figures
2.1 Generalizedimpluseresponsesofaone-standard-errorshock(−)toUS
realequitypricesonrealequitypricesacrosscountries(bootstrap
medianestimateswith90%bootstraperrorbounds). 27
2.2 Generalizedimpulseresponsesofaone-standard-errorshock(−)toUS
realequitypricesonrealoutputacrosscountries(bootstrapmedian
estimateswith90%bootstraperrorbounds). 28
2.3 Generalizedimpulseresponsesofaone-standard-errorshock(+)toUS
realoutputonrealoutputacrosscountries(bootstrapmedianestimates
with90%bootstraperrorbounds). 29
2.4 Generalizedimpulseresponsesofaone-standard-errorshock(+)toUS
realoutputonlong-terminterestratesacrosscountries(bootstrap
medianestimateswith90%bootstraperrorbounds). 30
3.1 Nowcastprobabilityofnegativegrowth,Canada. 48
3.2 Nowcastprobabilityofnegativegrowth,France. 48
3.3 Nowcastprobabilityofnegativegrowth,Germany. 49
3.4 Nowcastprobabilityofnegativegrowth,Italy. 49
3.5 Nowcastprobabilityofnegativegrowth,Japan. 50
3.6 Nowcastprobabilityofnegativegrowth,UK. 50
3.7 Nowcastprobabilityofnegativegrowth,US. 51
3.8 Nowcastprobabilityofnegativegrowth,G7countryaverage. 53
3.9 Nowcastprobabilityofnegativegrowth,G7countrycount. 53
4.1 Impulseresponsesofaone-standard-errorUSmonetarypolicyshockon
interestrates(percentperquarter). 65
4.2 Impulseresponsesofaone-standard-errorUSmonetarypolicyshockon
inflation(percentperquarter). 65
4.3 Impulseresponsesofaone-standard-errorUSmonetarypolicyshockon
output(percentperquarter). 66
5.1 Generalizedimpulseresponsesofapositiveunit(1s.e.)shocktooil
prices. 76
5.2 Generalizedimpulseresponsesofapositiveunit(1s.e.)shocktofood
prices. 77
ListofFigures
6.1 Domestictransmissionofcreditsupplyshocks(benchmarkmodel
FDIin). 90
6.2 Medianimpulseresponsesforselectedcountries/regionsandvariables
toforeigncreditsupplyshocks(benchmarkmodelFDIin).(a)GDP;
(b)Credit;(c)Corporatebondspreads;(d)Equityprices;(e)Exchange
rates(againsttheUSdollar). 91
7.1 PDFsforchangesinthebalanceoftrade. 103
7.2 Single-eventprobabilityforecastsforthebalanceoftrade. 105
7.3 Joint-eventprobabilityforecastsforthebalanceoftrade. 107
7.4 Generalizedimpulseresponsefunctionsw.r.t.namedshocks. 109
8.1 AverageRMSFEsofone-quarteraheadforecastsforrealoutputgrowth. 124
8.2 AverageRMSFEsofone-quarteraheadforecastsforinflation. 124
8.3 AverageRMSFEsofone-quarteraheadforecastsforshort-term
interestrate. 125
8.4 PerformanceofAveAveforecastsbasedonGVARmodelsversusthe
forecastsfromthefourbenchmarks—%offorecastwhereGVARAveAve
beatsbenchmarkat95%CIorbetter. 126
9.1 Competingnowcastsatt+30daysofEurostat’sfirst(Flash)GDP
growthestimatepublishedat45days. 143
10.1 Euroarea—negativeGDPshock. 157
10.2 Global—negativeGDPshock. 158
10.3 Euroarea—negativeequitypriceshock. 158
10.4 Global—negativeequitypriceshock. 159
10.5 Euroarea—negativeexchangerateshock(i.e.appreciation). 159
11.1 Co-movementofrealandfinancialeurovariables. 167
11.2 Cross-sectionalmeansandstandarddeviationsofeuro-areaoutput
diffrentialswithGermanyand10-yearbondspreadsonbund. 168
11.3 Cross-countryimpactonspreadsforIreland. 178
11.4 Theeffectonthe10-YBTP-bundspreadofafiscaladjustmentinItaly. 179
12.1 Impactofa10%shocktogovernmentconsumptioninGermanyto
governmentbondyields. 187
12.2 Impactofa10%shocktoUSgovernmentconsumptionongovernment
bondyields. 187
12.3 Impactofa10%shocktoSpanishgovernmentconsumptionon
governmentbondyields. 187
12.4 Impactofa10%shocktoItaliangovernmentconsumptionon
governmentbondyields. 188
13.1 GIRFsfora1%increaseinChineseGDP. 204
viii
ListofFigures
13.2 GIRFsfora1%increaseinChineseGDP:totalandindirecteffects. 206
13.3 GIRFsfora1%increaseinUSGDP. 208
14.1 Persistenceprofilesofthelong-runrelationstotherespectiveunit
shocks. 222
14.2 Impulseresponsestoaunitmonetaryshock. 225
15.1 Netexternalaccountsbycountrygrouping(4-quartersums,%ofGDP). 233
15.2 Compensationofemployeespaidbynon-financialcompanies
(4-quartersums,EURtrillions). 234
16.1 RMSFEfortheSwissCPI. 251
16.2 RMSFEforrealGDP. 252
17.1 IncreasingrelianceofemergingEuropeonforeignbankfunding.
ChangeindepositandcredittoGDP,2003–2007,inpercentagepoints. 256
17.2 ConcentrationofemergingEuropeexposuretowesternEurope. 257
17.3 Generalizedimpulseresponsesofanegative(−1σ)shocktoUSratesof
growthofrealequityprices. 261
ix