A Global Trade Model for the Euro Area
39 Pages Posted: 7 Feb 2017
Date Written: December 2016
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: Suggested Citation