A long run structural macroeconometric model of the UK

Anthony Garratt (), Kevin Lee, Mohammad Pesaran and Yongcheol Shin

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: A new modelling strategy is introduced that provides a practical approach to incorporating long-run structural relationships, suggested by economic theory, in an otherwise unrestricted VAR model. The strategy is applied to construct a small quarterly macroeconometric model of the UK, estimated over 1965-1999 in nine variables: domestic and foreign outputs, prices and interest rates, oil prices, the nominal effective exchange rate, and real money balances. The aim is to develop a model with effective exchange rate, and real money balances. The aim is to develop a model with a transparent and theoretically coherent foundation. Tests of restrictions on the long-run relations of the model are presented. The dynamic properties of the model are discussed using impulse responses for the effects of an oil price shock and a monetary policy shock on the long-run relations and the endogenous variables. A decision-based approach is used to identify the monetary policy shock as the movements in interest rates beyond those explained by the implementation of an optimal interest rate rule and by oil price, exchange rate and foreign interest rate innovations.

Keywords: long-run structural VAR; a core UK model; macroeconomic modelling; monetary policy shock; oil price shock (search for similar items in EconPapers)
JEL-codes: C32 E24 (search for similar items in EconPapers)
Pages: 39
Date: 2001-12
New Economics Papers: this item is included in nep-ecm, nep-eec, nep-ets, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Related works:
Journal Article: A Long run structural macroeconometric model of the UK (2003)
Working Paper: A Long-run Structural Macro-econometric Model of the UK (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:35

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