GPM6: The Global Projection Model with 6 Regions

Carabenciov, Ioan; Freedman, Charles; Garcia-Saltos, Roberto; Laxton, Douglas; Kamenik, Ondra; Manchev, Petar

doi:10.5089/9781484318942.001

Cited by 40 publications

(30 citation statements)

References 14 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…I consider two multi-country monetary models: the TMCM, which includes the United States and other developed countries, described in Taylor (1993) 9 and GPM6, the IMF global model, which includes the United States, other developed countries, and emerging market countries in Latin American and Asia. GPM6 is described in Carabenciov, Freedman, Garcia-Saltos, Laxton, Kamenik, Manchev (2013). 10 Calculations by Taylor and Wieland (2012) show that the TMCM has effects in the United States of monetary shocks that are very similar to the new Keynesian models of Christiano, Eichenbaum and Evans (2005) and Smets and Wouters (2007).…”

Section: Global Impacts Of Deviations From Monetary Policy Rulesmentioning

confidence: 99%

“…Clarida, Gali and Gertler (2002) built a two-country model with explicit micro-foundations in order to evaluate monetary policy rules in a global context. Carabenciov, Freedman, Garcia-Saltos, Laxton, Kamenik and Manchev (2013) have built on such work in empirical research that can be traced back to the empirical models compared by Bryant, Hooper, and Mann (1993). Clarida (2014) provides a modern and practical perspective and Obstfeld (2014) adds a useful discussion.…”

Section: Policy Tradeoffs In a Globalized World Economymentioning

confidence: 99%

“…I consider two multi-country monetary models: the TMCM, which includes the United States and other developed countries, described in Taylor (1993) 9 and GPM6, the IMF global model, which includes the United States, other developed countries, and emerging market countries in Latin American and Asia. GPM6 is described in Carabenciov, Freedman, Garcia-Saltos, Laxton, Kamenik, Manchev (2013). 10 Calculations by Taylor and Wieland (2012) States is compared with Japan as well as with the Latin American countries (LA 6, which include Brazil, Chile, Colombia, Mexico and Peru) and emerging Asia countries (EA6, which include China, India, South Korea, Indonesia, Taiwan, Thailand, Malaysia, Hong Kong, Philippines and Singapore).…”

mentioning

confidence: 99%

See 2 more Smart Citations

The Federal Reserve in a Globalized World Economy

Taylor¹

2016

The Federal Reserve's Role in the Global Economy

View full text Add to dashboard Cite

Economic research as far back as the early 1980s showed that simple rules-based monetary policy would result in good economic performance in a globalized world economy. 2 According to this research, if each central bank in the world followed a steady monetary policy rule that was optimal for its own country's price and output stability, it would also contribute to a framework of stability for the other countries. In fact, quantitative research showed that there would be little additional gain from the central banks' jointly optimizing their policies. This finding was, and still is, the implication of empirically estimated multi-country monetary models with highly integrated international capital markets, no-arbitrage conditions in the term-structure of interest rates, forward-looking expectations, and price and wage rigidities.The historical experience of the Great Moderation period of the 1980s, 1990s, and until recently largely validated this result. As central banks moved toward more transparent rulesbased monetary policies-including through inflation-targeting-economic performance improved. The improvement was especially dramatic compared with the instability of the 1970s, when, following the demise of the Bretton Woods system, monetary policy was highly discretionary and unfocused. Mervyn King (2003) called it a NICE period for it was non-1 This paper was prepared for the Conference "The Federal Reserve's Role in the Global Economy: A Historical Perspective," hosted by the Federal Reserve Bank of Dallas. The paper focuses on monetary policy rather than on the regulatory parts of Federal Reserve policy. Some of the results are based on research prepared for the BIS (Taylor (2013c). I thank Michael Bordo, Claudio Borio, Richard Fisher, Arminio Fraga, Lawrence Goodman, Simon Hilpert, Ronald McKinnon, David Papell, Kenneth Rogoff, George Shultz, Volker Wieland and the staff of the Globalization and Monetary Policy Institute at the Federal Reserve Bank of Dallas for helpful comments and assistance. 2 See, for example, the studies by Carlozzi and Taylor (1985), Taylor (1985Taylor ( , 1993, Clarida, Gali and Gertler (2002), Obstfeld and Rogoff (2002). inflationary and consistently expansionary. Toward the later part of this NICE GreatModeration, central banks in many emerging market countries also moved toward more rule-like policies with long-run price stability goals. Their performance and their contribution to global stability also improved, especially compared with the earlier periods of frequent emerging market financial crises.The situation had similarities to a game-theory equilibrium in which each country chose its own good monetary policy taking as given that other countries would do much the same under a basic understanding that the outcome would be nearly as good as if they coordinated their policy choices in a cooperative fashion. Attempts to coordinate policy choices across countries would likely have added little to the large improvement in macroeconomic stability during the Great Moderation, much...

show abstract

Section: Global Impacts Of Deviations From Monetary Policy Rulesmentioning

confidence: 99%

Section: Policy Tradeoffs In a Globalized World Economymentioning

confidence: 99%

“…I consider two multi-country monetary models: the TMCM, which includes the United States and other developed countries, described in Taylor (1993) 9 and GPM6, the IMF global model, which includes the United States, other developed countries, and emerging market countries in Latin American and Asia. GPM6 is described in Carabenciov, Freedman, Garcia-Saltos, Laxton, Kamenik, Manchev (2013). 10 Calculations by Taylor and Wieland (2012) States is compared with Japan as well as with the Latin American countries (LA 6, which include Brazil, Chile, Colombia, Mexico and Peru) and emerging Asia countries (EA6, which include China, India, South Korea, Indonesia, Taiwan, Thailand, Malaysia, Hong Kong, Philippines and Singapore).…”

mentioning

confidence: 99%

See 1 more Smart Citation

The Federal Reserve in a Globalized World Economy

Taylor¹

2016

The Federal Reserve's Role in the Global Economy

View full text Add to dashboard Cite

show abstract

Section: Policy Tradeoffs In a Globalized World Economymentioning

confidence: 99%

The Federal Reserve in a Globalized World Economy

Taylor

2014

gwp

View full text Add to dashboard Cite

This paper starts from the theoretical observation that simple rules-based monetary policy will result in good economic performance in a globalized world economy and the historical observation that this occurred during the Great Moderation period of the 1980s and 1990s. It tries to answer a question posed by Paul Volcker in 2014 about the global repercussions of monetary policies pursued by advanced economy central banks in recent years. I start by explaining the basic theoretical framework, its policy implications, and its historical relevance. I then review the empirical evidence on the size of the international spillovers caused by deviations from rules-based monetary policy, and explore the many ways in which these spillovers affect and interfere with policy decisions globally. Finally, I consider ways in which individual monetary authorities and the world monetary system as a whole could adhere better to rules-based policies in the future and whether this would be enough to achieve the goal of stability in the globalized world economy. Economic research as far back as the early 1980s showed that simple rules-based monetary policy would result in good economic performance in a globalized world economy. 2According to this research, if each central bank in the world followed a steady monetary policy rule that was optimal for its own country's price and output stability, it would also contribute to a framework of stability for the other countries. In fact, quantitative research showed that there would be little additional gain from the central banks' jointly optimizing their policies. This finding was, and still is, the implication of empirically estimated multi-country monetary models with highly integrated international capital markets, no-arbitrage conditions in the term-structure of interest rates, forward-looking expectations, and price and wage rigidities. Carlozzi and Taylor (1985), Taylor (1985, 1993), Clarida, Gali and Gertler (2002, Obstfeld and Rogoff (2002 . 5 The Bank of Japan also announced an inflation target to 2 percent, which has an element of international cooperation because that is close to the numerical target of the Fed and the ECB. 4monetary system as a whole could adhere better to rules-based policies in the future and whether this would be enough to achieve the goal of stability in the globalized world economy. Policy Tradeoffs in a Globalized World EconomyThe idea that monetary policy rules deliver good economic performance in a globalized world economy comes out of a multi-country monetary modelling framework that I have been using in research and graduate teaching for many years (Carlozzi and Taylor (1985), Taylor (1993, 2013a)). 6 It assumes perfect capital mobility (as in the original Dornbush-MundellFleming model), which is of course quite appropriate for a "globalized world economy." It also assumes staggered wage and price setting as in the Taylor (1980) model, so that inflation today depends in part on inflation in the future. Domestic prices in each country are a...

show abstract

“…In a similar vein, Canova and Ciccarelli (2009) put forth high-dimensional multi-country VAR models, which they suggest to estimate by Bayesian methods. Moreover, a number of (semi-)structural multi-country models are being developed for the purpose of spillover analysis (Carabenciov et al, 2013;Vitek, 2014). 2 1 Eickmeier (2007) considers a large-dimensional two-country factor model for the US and Germany in order to estimate the spillovers from US shocks.…”

Section: Introductionmentioning

confidence: 99%

To Bi, or not to Bi? Differences in Spillover Estimates from Bilateral and Multilateral Multi-country Models

Georgiadis

2015

gwp

View full text Add to dashboard Cite

Asymptotic analysis and Monte Carlo simulations show that spillover estimates obtained from widely-used bilateral (such as two-country VAR) models are significantly less accurate than those obtained from multilateral (such as global VAR) models. In particular, the accuracy of spillover estimates obtained from bilateral models depends on two aspects of economies' integration with the rest of the world. First, accuracy worsens as direct bilateral transmission channels become less important, for example when the spillover-sender accounts only for a small share of the spillover-recipient's overall integration with the rest of the world. Second, accuracy worsens as indirect higher-order spillovers and spillbacks become more important, for example when the spillover-recipient is more integrated with the rest of the world overall. Empirical evidence on the global output spillovers from US monetary policy is consistent with these generic results: Spillover estimates obtained from two-country VAR models are systematically smaller than those obtained from a global VAR model; and the differences between spillover estimates obtained from two-country VAR models and a global VAR model are more pronounced for economies for which the US accounts for a smaller share of their overall trade and financial integration with the rest of the world, and for economies which are more integrated with the rest of the world overall. JEL codes: F44, C33

show abstract

GPM6: The Global Projection Model with 6 Regions

Cited by 40 publications

References 14 publications

The Federal Reserve in a Globalized World Economy

The Federal Reserve in a Globalized World Economy

The Federal Reserve in a Globalized World Economy

To Bi, or not to Bi? Differences in Spillover Estimates from Bilateral and Multilateral Multi-country Models

Contact Info

Product

Resources

About