A Global Projection Model for Euro Area Large Economies

ByZoltan Jakab, Pavel Lukyantsau, Shengzu Wang

March 2, 2015

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The GPM project is designed to improve the toolkit for studying both own-country and cross-country linkages. This paper creates a special version of GPM that includes the four largest Euro Area (EA) countries. The EA countries are more vulnerable to domestic and external demand shocks because adjustments in the real exchange rate between EA countries occur more gradually through inflation differentials. Spillovers from tight credit conditions in each EA country are limited by direct trade channels and small confidence spillovers, but we also consider scenarios where banks in all EU countries tighten credit conditions simultaneously.

Subject: Bank credit, Exchange rate adjustments, Financial services, Foreign exchange, Inflation, Money, Prices, Real exchange rates, Real interest rates

Keywords: Bank credit, deflation spiral, EA block, EA country, EA economy, EA inflation, Euro area, euro area inflation, exchange rate, Exchange rate adjustments, Forecasting, Global, Global projection model, Inflation, reaction function, Real exchange rates, Real interest rates, WP

Pages:
31
Volume:
2015
DOI:
https://doi.org/10.5089/9781498399609.001
Issue:
050
Series:
Working Paper No. 2015/050
Stock No:
WPIEA2015050
ISBN:
9781498399609
ISSN:
1018-5941

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