Global VAR modeling using the GVAR Toolbox 2.0
The GVAR model is a compact model of the world economy designed to explicitly model the economic and financial interdependencies at national and international levels.
Individual country/region specific vector error-correcting models are estimated, where the domestic variables are related to corresponding foreign variables constructed exclusively to match the international trade pattern of the country under consideration. The individual country models are then linked in a consistent manner so that the GVAR model is solved for the world as a whole.
The GVAR methodology provides a general yet practical global modeling framework for the quantitative analysis of the relative importance of different shocks and channels of transmission mechanisms. This makes it a suitable tool for policy analysis. Its use, however, is much broader and can be used for forecasting purposes as well as other applications. It is a very general modeling framework for any large system where components are driven by weighted averages of other components - whatever the data. The approach can be equally applied to regions (e.g. regional housing markets), states or firms, to name a few possibilities.
The course will introduce the necessary tools and econometric techniques used in the development and analysis of a GVAR model for policy analysis and forecasting. The course is primarily tailored to participants who are interested in using the GVAR methodology, or new users, wishing to familiarise themselves with the use of the Toolbox and underlying econometric techniques in a short time frame.
By the end of the course the participants will have acquired detailed knowledge of and extensive hands-on experience in:
- setting up the database for such models
- specifying and estimating individual VECMX* models
- conducting diagnostic tests for the individual model equations
- testing for weak exogeneity
- testing over-identifying restrictions on the cointegrating vectors
- including a dominant unit model in the GVAR
- solving the GVAR model using fixed/time varying weights
- performing dynamic analysis using the GVAR model including:
- persistence profiles (PPs)
- generalised impulse response functions (GIRFs)
- generalised forecast error variance decompositions (GFEVDs)
- forecasting with the GVAR
- trend/cycle decomposition of the GVAR
The course includes both theoretical and practical sessions. The theoretical sessions cover the theoretical foundations underlying the GVAR modelling approach. This knowledge provides useful background for the practical sessions. These include hands on use of the GVAR Toolbox 2.0 that will give the participants the opportunity to build their own GVAR model with step by step guidance from the instructor Dr L. Vanessa Smith.
The training will be delivered by Dr. L. Vanessa Smith. Dr L.V. Vanessa Smith is a Lecturer at the University of York. She holds a first class degree in Mathematics from the University of Patras (Greece), an MSc in Finance from the University of York (UK), and a PhD in Econometrics from the University of Nottingham (UK). Her research focuses on global macroeconometric modelling and the econometric analysis of dynamic panels.