GPM6: The Global Projection Model with 6 Regions

Abstract

This is the sixth of a series of papers that are being written as part of a project to estimate a small quarterly Global Projection Model (GPM). The GPM project is designed to improve the toolkit to which economists have access for studying both own-country and cross-country linkages. In this paper, we add three more regions and make a number of other changes to a previously estimated small quarterly projection model of the US, euro area, and Japanese economies. The model is estimated with Bayesian techniques, which provide a very efficient way of imposing restrictions to produce both plausible dynamics and sensible forecasting properties.

Keywords: Forecasting models, Real effective exchange rates, Interest rates, External shocks, Unemployment, Demand, Spillovers, World Economic Outlook, Macroeconomic Modeling, Bayesian Estimation, Monetary Policy, exchange rate, inflation, real exchange rate, real interest rate, aggregate demand, purchasing power parity, rate of inflation, inflation target, nominal interest rate, real interest rates, exchange rates, purchasing power, real effective exchange rate, nominal exchange rate, effective exchange rate, real exchange rates, exchange rate movements, purchasing power parity terms, inflation rates, inflation equation, exchange rate appreciation, real exchange rate appreciation, inflationary pressu

JEL Classification: C51, E31, E52