Joint modelling of fiscal and monetary policies should elucidate on their interaction. We construct an eight-dimensional parsimonious structural vector equilibrium correction model (PSVECM) of the US macro economy over the last five decades. The fiscal deficit is found to be one of the five...

This paper addresses the issues of identification and dating of the Euro-zone business cycle by using the Markov-switching approach innovated by Hamilton in his analysis of the US business cycle. Regime shifts in the stochastic process of economic growth in the Euro-zone are identified by...

The determination of the $/£ exchange rate is studied in a small symmetric macroeconometric model including UK-US differentials in inflation, output gap, short and long-term interest rates for the four decades since the breakdown of Bretton Woods. The key question addressed is the possible...

Introducing the approach by Masanao Aoki (1981) to time series econometrics, we show that the dynamics of symmetric linear possibly cointegrated two-country VAR models can be separated into two autonomous subsystems: the country averages and country differences, where the latter includes the...

We study the exchange rate effects of monetary policy in a balanced macroeconometric two-country model for the US and UK. In contrast to the empirical literature on the 'delayed overshooting puzzle', which consistently treats the domestic and foreign countries unequally in themodelling process,...

This note aims to identify the stable long-run relationships as well as unstable driving forces of the world economy using an aggregated approach involving the four largest currency blocks. The small global macromodel encompasses aggregated quarterly US, UK, Japanese and Euro Area data for the...

In this paper we set up a baseline, but nevertheless advanced and complete model representing detailed goods market dynamics, heterogeneous labor markets, dual and cross-dual wage-price adjustment processes, as well as counter-cyclical government policies. The cyclical movements of output...

In this paper we introduce a cointegrated VAR modelling approach for two-country macro dynamics. In order to tackle the curse of dimensionality resulting from the number of variables in multi-country models, we investigate the applicability of the approach by Aoki (1981) frequently used in...

The objective of this study is to compare alternative computerized model-selection strategies in the context of the vector autoregressive (VAR) modeling framework. The focus is on a comparison of subset modeling strategies with the general-to-specific reduction approach automated by PcGets....