A Global Trade Model for the Euro Area

39 Pages Posted: 7 Feb 2017

See all articles by Antonello D'Agostino

Antonello D'Agostino

European Stability Mechanism; Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department

Michele Modugno

Board of Governors of the Federal Reserve System

Chiara Osbat

European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: December 2016

Abstract

We propose a model for analyzing euro area trade based on the interaction between macroeconomic and trade variables. First, we show that macroeconomic variables are necessary to generate accurate short-term trade forecasts; this result can be explained by the high correlation between trade and macroeconomic variables, with the latter being released in a more timely manner. Second, the model tracks well the dynamics of trade variables conditional on the path of macroeconomic variables during the great recession; this result makes our model a reliable tool for scenario analysis.

Keywords: euro area, trade, factor models, news, now-cast, conditional forecast

JEL Classification: F17, F47, C38

Suggested Citation

D'Agostino, Antonello and Modugno, Michele and Osbat, Chiara, A Global Trade Model for the Euro Area (December 2016). ECB Working Paper No. 1986, Available at SSRN: https://ssrn.com/abstract=2911010

Antonello D'Agostino

European Stability Mechanism ( email )

6a Circuit de la Foire Internationale
L-1347
Luxembourg

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department ( email )

Dame Street
P.O. Box 559
Dublin 2
Ireland

Michele Modugno

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Chiara Osbat (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 6821 (Phone)
+49 69 1344 6000 (Fax)

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