Transmission of Shocks and Monetary Policy in the Euro Area' an Exercise With Nigem

Abstract

Global macroeconometric models can be a powerful tool for economic analysis and forecasting in various scenarios. This paper analyses the NiGEM model and its application to the euro area, placing particular emphasis on the study of the relative situation of the member countries' economies. The findings of the paper show that NiGEM provides for different reactions by the European economies to common exchange- and interest-rate changes, owing to their different economic structures. Notwithstanding the potential interest of these findings, the design and evaluation of shocks in NiGEM may be seen to call for a high degree of caution if NiGEM is to be considered a reliable and useful instrument.

Keywords: NiGEM model, interest-rate changes, shocks, monetary policy

JEL Classification: E17, E52