{
  "title": "A Global Projection Model for Euro Area Large Economies",
  "publication": "IMF Working Papers, March 2, 2015",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/a-global-projection-model-for-euro-area-large-economies-42760",
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  "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.",
  "sections": [
    {
      "heading": "Summary and purpose",
      "content": "- The GPM project is designed to improve the toolkit for studying both own-country and cross-country linkages.\n- This paper creates a special version of GPM that includes the four largest Euro Area (EA) countries.\n- 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.\n- Spillovers from tight credit conditions in each EA country are limited by direct trade channels and small confidence spillovers.\n- The paper also considers scenarios where banks in all EU countries tighten credit conditions simultaneously."
    },
    {
      "heading": "Key findings and vulnerabilities",
      "content": "- EA countries exhibit greater vulnerability to domestic and external demand shocks due to gradual real exchange rate adjustments working through inflation differentials.\n- Tight credit conditions in an individual EA country transmit limited spillovers via direct trade channels and small confidence spillovers.\n- Simultaneous tightening of bank credit conditions across all EU countries is analyzed as an alternative scenario with potentially larger aggregate effects."
    },
    {
      "heading": "Model scope and design",
      "content": "- Special GPM version: includes the four largest Euro Area (EA) countries.\n- Focus areas: bank credit, exchange rate adjustments, financial services, foreign exchange, inflation, money, prices, real exchange rates, real interest rates.\n- Keywords preserved from source: 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."
    },
    {
      "heading": "Scenarios analyzed",
      "content": "- Baseline: individual-country credit tightening with limited trade and confidence spillovers.\n- Alternative: banks in all EU countries tighten credit conditions simultaneously (system-wide tightening scenario).\n\n---\n\n Content in this bundle\n\n- Appendix I. Out-of-sample forecast performance\n  - Appendix I. Out-of-sample forecast performance (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Appendix I. Out-of-sample forecast performance (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/a-global-projection-model-for-euro-area-large-economies-42760"
    }
  ],
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    "[Markdown version](/en/publications/wp/issues/2016/12/31/a-global-projection-model-for-euro-area-large-economies-42760/index.md)",
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    "Authors: Zoltan Jakab, Pavel Lukyantsau, Shengzu Wang",
    "Published: March 2, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781498399609.001",
    "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.",
    "The paper also considers scenarios where banks in all EU countries tighten credit conditions simultaneously.",
    "EA countries exhibit greater vulnerability to domestic and external demand shocks due to gradual real exchange rate adjustments working through inflation differentials.",
    "Tight credit conditions in an individual EA country transmit limited spillovers via direct trade channels and small confidence spillovers.",
    "Simultaneous tightening of bank credit conditions across all EU countries is analyzed as an alternative scenario with potentially larger aggregate effects.",
    "Special GPM version: includes the four largest Euro Area (EA) countries.",
    "Focus areas: bank credit, exchange rate adjustments, financial services, foreign exchange, inflation, money, prices, real exchange rates, real interest rates.",
    "Keywords preserved from source: 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.",
    "Baseline: individual-country credit tightening with limited trade and confidence spillovers.",
    "Alternative: banks in all EU countries tighten credit conditions simultaneously (system-wide tightening scenario).",
    "**Appendix I. Out-of-sample forecast performance**"
  ],
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