|
Activity Number:
|
193
|
|
Type:
|
Invited
|
|
Date/Time:
|
Tuesday, August 5, 2003 : 8:30 AM to 10:20 AM
|
|
Sponsor:
|
Journal of Business and Economic Statistics (JBES)
|
| Abstract - #300263 |
|
Title:
|
Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model
|
|
Author(s):
|
Hashem Pesaran*+ and Til Schuermann and Scott Weiner
|
|
Companies:
|
University of Cambridge and Federal Reserve Bank of New York and Alliance Capital Management, L.P.
|
|
Address:
|
Faculty of Economics and Politics, Cambridge, CB3 9DE, , United Kingdom
|
|
Keywords:
|
economic interlinkages ; global macroeconometric modeling ; credit loss distribution ; risk management ; global vector error-correcting model
|
|
Abstract:
|
Financial institutions are ultimately exposed to macroeconomic fluctuations in the global economy. This paper proposes and builds a compact global model capable of generating forecasts for a core set of macroeconomic variables across a number of countries. The model explicitly allows for the interdependencies that exist between national and international variables. Individual region-specific vector error-correcting models are estimated, where the domestic variables are related to corresponding foreign variables constructed exclusively to match the international trade pattern of the country under consideration. The individual country models are then linked in a consistent and cohesive manner to generate forecasts for all the variables in the world economy simultaneously. The global model is estimated for 26 countries grouped into 11 regions using quarterly data over 1979Q1-99Q1. The degree of regional interdependencies is investigated via generalized impulse responses where the effects of shocks to a given variable in a given country on the rest of the world are provided. The model is then used to investigate the effects of various global risk scenarios on a bank's loan portfolio.
|
