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A Multi-Country BVAR Model for the External Sector

Author

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  • Olga Korotkikh

    (Bank of Russia)

Abstract

This paper describes a multi-country BVAR model developed and used by the Monetary Policy Department of the Bank of Russia. The model makes it possible to build coordinated scenario forecasts for the main macro-variables of the USA, the euro area, and China. The simultaneous modelling for the three economies makes it possible to take into account multi-country interactions of the variables and, thus, improve the predictive performance of the model compared to VAR analogues intended for individual countries. The model is based on the deviations of the variables from their potential values, which enhances GDP growth forecasts compared to a non-detrended design. A wide range of macroeconomic and financial indicators in the model makes the forecast of overall inflation more accurate against simpler benchmarks.

Suggested Citation

  • Olga Korotkikh, 2020. "A Multi-Country BVAR Model for the External Sector," Russian Journal of Money and Finance, Bank of Russia, vol. 79(4), pages 98-112, December.
    • Handle: RePEc:bkr:journl:v:79:y:2020:i:4:p:98-112
    DOI: 10.31477/rjmf.202004.98
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    References listed on IDEAS

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    More about this item

    Keywords

    multi-country model; Bayesian methods; conditional forecasting; VAR model;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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