The ECB's New Multi-Country Model for the euro area: NMCM — Simulated with rational expectations

Dieppe, Alistair; Pandiella, Alberto González; Willman, Alpo

doi:10.1016/j.econmod.2012.07.010

Cited by 23 publications

(28 citation statements)

References 45 publications

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“…It is estimated and can be used either on a single country basis or as a linked euro area multi-country model capturing cross-country interactions and it can be simulated under rational or learning expectations (Dieppe et al, 2012b(Dieppe et al, , 2013.…”

Section: Key Features Of the Nmcmmentioning

confidence: 99%

“…The model used in this paper -the New Multi-Country Model (NMCM) (Dieppe et al, 2012b(Dieppe et al, , 2013) -allows distinguishing between different environments in which a mark-up shock could take place. Three key features of the NMCM make it particularly suited to analyse the effects of price and cost mark-up changes inside the union: (1) the model links all major euro area countries via a single monetary policy; (2) it has been estimated and not calibrated; (3) it can be used under http://dx.doi.org/10.1016/j.jmacro.2014.08.008 0164-0704/Ó 2014 Elsevier Inc. All rights reserved.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Modelling internal devaluation experiences in Europe: Rational or learning agents?

Angelini

Dieppe

Pierluigi

2015

Journal of Macroeconomics

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Section: Key Features Of the Nmcmmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Modelling internal devaluation experiences in Europe: Rational or learning agents?

Angelini

Dieppe

Pierluigi

2015

Journal of Macroeconomics

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“…In the standard NMCM specification, long‐term rates are forward‐looking (see Equation 36 in Dieppe et al ) and there are no financial frictions. Therefore, the effects of financial fragmentation, excessive debt and subsequent deleveraging forces are not explicitly captured by the model.…”

mentioning

confidence: 99%

External and Macroeconomic Adjustment in the Larger Euro‐Area Countries

Angelini

Zorzi²,

Aerssen³

2016

International Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The paper is released in order to make the research of CompNet generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB, the ESCB, and of other organisations associated with the Network. Terms of use: Documents in EconStor may AcknowledgementsWe are grateful for the insightful comments by L. Dedola, A. Dieppe, G. Kenny, G. Lombardo, M. Rubaszek, F. Smets as well as participants of ECB and ESCB seminars. The views expressed are those of the authors and do not necessarily reflect those of the ECB. Elena AngeliniEuropean Central Bank; e-mail: elena.angelini@ecb.europa.euMichele Ca' Zorzi European Central Bank; e-mail: michele.cazorzi@ecb.europa.eu Katrin ForsterEuropean Central Bank; e-mail: katrin.forster@ecb.europa.eu AbstractA balanced current account in the euro area has disguised sizeable net lending imbalances at the country level, exposing the common currency area to severe pressures during the …nancial crisis.The key contribution of this paper is to evaluate the adjustment process through the lenses of the New Multi Country Model at the country and sectoral level. We …nd that shocks to the external, …scal and monetary environment help explain, to a large degree, the sizable current account adjustment and rise in unemployment in Spain. The model also suggests that a recovery in wage competitiveness helps to reduce external de…cits at the cost of higher net borrowing by households. The stimulus e¤ects on aggregate demand, via the interest rate response of the common monetary authority and the competitiveness channel, are present but not overly large, as the rebound in economic activity depends mainly on global demand, supportive monetary policy, business and consumer con…dence.Key words: net lending, euro area countries, current account, modeling JEL Classi…cation: C5, F32, F41, O52. NON-TECHNICAL SUMMARYThe current account in the euro area has historically been close to balance. The presence of de…cits and surpluses across the di¤erent participating members was not generally perceived as a major policy issue, as e.g. the Spanish de…cit was o¤set by the German surplus (Williamson, 2007).The sizable net borrowing by the euro area public sector was instead o¤set by the net savings of the euro area private sector. Following the …nancial crisis the academic literature has moved from a largely beni...

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“…For long decades the tendency of conventional economic theory has indeed been to disregard many of the macroeconomic variables that played a major role in the development of the crisis, such as money, debt and credit. Despite being the most important actor in creating credit in modern economies, as we will explain in Section 2.1, the private banking system has been systematically excluded from macroeconomic models, even those used by major central banks for forecasting and policy analysis (Brayton and Tinsley, 1996;Harrison et al, 2005;Dieppe et al, 2011). The omission has caused the discipline to overlook some of the most worrying economic trends of the past decades -the exponential increase in private debt levels, for instance -and to arrive ill-prepared for the financial crisis.…”

Section: Introductionmentioning

confidence: 99%

A simple model of income, aggregate demand and the process of credit creation by private banks

Bernardo

Campiglio

2013

Empirica

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This paper presents a small macroeconomic model describing the main mechanisms of the process of credit creation by the private banking system. The model is composed of a core unit-where the dynamics of income, credit, and aggregate demand are determined-and a set of sectoral accounts that ensure its stock-flow consistency. In order to grasp the role of credit and banks in the functioning of the economic system, we make an explicit distinction between planned and realized variables, thanks to which, while maintaining the ex-post accounting consistency, we are able to introduce an ex-ante wedge between current aggregate income and planned expenditure. Private banks are the only economic agents capable of filling this gap through the creation of new credit. Through the use of numerical simulation, we discuss the link between credit creation and the expansion of economic activity, also contributing to a recent academic debate on the relation between income, debt, and aggregate demand.

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The ECB's New Multi-Country Model for the euro area: NMCM — Simulated with rational expectations

Cited by 23 publications

References 45 publications

Modelling internal devaluation experiences in Europe: Rational or learning agents?

Modelling internal devaluation experiences in Europe: Rational or learning agents?

External and Macroeconomic Adjustment in the Larger Euro‐Area Countries

A simple model of income, aggregate demand and the process of credit creation by private banks

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