Back Matter

Appendix A. Description of the Data Set

Estimation is based on quarterly data on a variety of macroeconomic and financial market variables observed for forty economies over the sample period 1999Q1 through 2014Q3. The economies under consideration are Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, the Czech Republic, Denmark, Finland, France, Germany, Greece, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Malaysia, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Russia, Saudi Arabia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, the United Kingdom, and the United States. Where available, this data was obtained from the GDS and WEO databases compiled by the International Monetary Fund. Otherwise, it was extracted from the IFS database produced by the International Monetary Fund.

The macroeconomic variables under consideration are the price of output, the price of consumption, the quantity of output, the quantity of private consumption, the quantity of exports, the quantity of imports, the nominal wage, the unemployment rate, employment, the quantity of public domestic demand, the fiscal balance ratio, and the prices of nonrenewable energy and nonenergy commodities. The price of output is measured by the seasonally adjusted gross domestic product price deflator, while the price of consumption is proxied by the seasonally adjusted consumer price index. The quantity of output is measured by seasonally adjusted real gross domestic product, while the quantity of private consumption is measured by seasonally adjusted real private consumption expenditures. The quantity of exports is measured by seasonally adjusted real export revenues, while the quantity of imports is measured by seasonally adjusted real import expenditures. The nominal wage is derived from the quadratically interpolated annual labor income share, while the unemployment rate is measured by the seasonally adjusted share of total unemployment in the total labor force, and employment is measured by quadratically interpolated annual total employment. The quantity of public domestic demand is measured by the sum of quadratically interpolated annual real consumption and investment expenditures of the general government, while the fiscal balance is measured by the quadratically interpolated annual overall fiscal balance of the general government. The prices of energy and nonenergy commodities are proxied by broad commodity price indexes denominated in United States dollars.

The financial market variables under consideration are the nominal policy interest rate, the short term nominal market interest rate, the nominal bank lending interest rate, the long term nominal market interest rate, the price of equity, and the nominal bilateral exchange rate. The nominal policy interest rate is measured by the central bank policy rate, the short term nominal market interest rate is measured by a reference bank deposit rate, the nominal bank lending interest rate is measured by a reference bank lending rate, and the long term nominal market interest rate is measured by a long term government bond yield. In cases where these interest rates are not reported, the closest available substitute is used. The price of equity is proxied by a broad stock price index denominated in domestic currency units, while the nominal bilateral exchange rate is measured by the domestic currency price of one United States dollar. All of these financial market variables are expressed as period average values.

Calibration is based on annual data obtained from databases compiled by the International Monetary Fund where available, and from the Bank for International Settlements or the World Bank Group otherwise. Macroeconomic great ratios are derived from the WEO and WDI databases, while financial great ratios are also derived from the IFS and BIS databases. Bilateral trade weights are derived for goods on a cost, insurance and freight basis from the DOTS database. Bank lending and nonfinancial corporate borrowing weights are derived on a consolidated ultimate risk basis from the BIS database. Portfolio debt and equity investment weights are derived from the CPIS, BIS, and WDI databases.

Appendix B. Tables and Figures

Table 1.

Parameter Estimation Results

article image
Note: All priors are normally distributed, while all posteriors are asymptotically normally distributed. All auxiliary parameters have degenerate priors with mean zero.
Figure 1.
Figure 1.

IRFs of Macro Variables to a Domestic Productivity Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic productivity shocks which raise output price inflation by one percentage point. All variables are annualized, where applicable.
Figure 2.
Figure 2.

IRFs of Financial Variables to a Domestic Productivity Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic productivity shocks which raise output price inflation by one percentage point. All variables are annualized, where applicable.
Figure 3.
Figure 3.

IRFs of Macro Variables to a Domestic Labor Supply Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic labor supply shocks which raise the labor force by one percent. All variables are annualized, where applicable.
Figure 4.
Figure 4.

IRFs of Financial Variables to a Domestic Labor Supply Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic labor supply shocks which raise the labor force by one percent. All variables are annualized, where applicable.
Figure 5.
Figure 5.

IRFs of Macro Variables to a Domestic Consumption Demand Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic consumption demand shocks which raise private consumption by one percent. All variables are annualized, where applicable.
Figure 6.
Figure 6.

IRFs of Financial Variables to a Domestic Consumption Demand Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic consumption demand shocks which raise private consumption by one percent. All variables are annualized, where applicable.
Figure 7.
Figure 7.

IRFs of Macro Variables to a Domestic Investment Demand Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic investment demand shocks which raise private investment by one percent. All variables are annualized, where applicable.
Figure 8.
Figure 8.

IRFs of Financial Variables to a Domestic Investment Demand Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic investment demand shocks which raise private investment by one percent. All variables are annualized, where applicable.
Figure 9.
Figure 9.

IRFs of Macro Variables to a Domestic Monetary Policy Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic monetary policy shocks which raise the nominal policy interest rate by one percentage point. All variables are annualized, where applicable.
Figure 10.
Figure 10.

IRFs of Financial Variables to a Domestic Monetary Policy Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic monetary policy shocks which raise the nominal policy interest rate by one percentage point. All variables are annualized, where applicable.
Figure 11.
Figure 11.

IRFs of Macro Variables to a Domestic Credit Risk Premium Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic credit risk premium shocks which raise the short term nominal market interest rate by one percentage point. All variables are annualized, where applicable.
Figure 12.
Figure 12.

IRFs of Financial Variables to a Domestic Credit Risk Premium Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic credit risk premium shocks which raise the short term nominal market interest rate by one percentage point. All variables are annualized, where applicable.
Figure 13.
Figure 13.

IRFs of Macro Variables to a Domestic Duration Risk Premium Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic duration risk premium shocks which raise the long term nominal market interest rate by one percentage point. All variables are annualized, where applicable.
Figure 14.
Figure 14.

IRFs of Financial Variables to a Domestic Duration Risk Premium Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic duration risk premium shocks which raise the long term nominal market interest rate by one percentage point. All variables are annualized, where applicable.
Figure 15.
Figure 15.

IRFs of Macro Variables to a Domestic Equity Risk Premium Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic equity risk premium shocks which raise the price of equity by ten percent. All variables are annualized, where applicable.
Figure 16.
Figure 16.

IRFs of Financial Variables to a Domestic Equity Risk Premium Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic equity risk premium shocks which raise the price of equity by ten percent. All variables are annualized, where applicable.
Figure 17.
Figure 17.

IRFs of Macro Variables to a Domestic Fiscal Expenditure Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic fiscal expenditure shocks which raise the primary fiscal balance ratio by one percentage point. All variables are annualized, where applicable.
Figure 18.
Figure 18.

IRFs of Financial Variables to a Domestic Fiscal Expenditure Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic fiscal expenditure shocks which raise the primary fiscal balance ratio by one percentage point. All variables are annualized, where applicable.
Figure 19.
Figure 19.

IRFs of Macro Variables to a Domestic Fiscal Revenue Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic fiscal revenue shocks which raise the primary fiscal balance ratio by one percentage point. All variables are annualized, where applicable.
Figure 20.
Figure 20.

IRFs of Financial Variables to a Domestic Fiscal Revenue Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic fiscal revenue shocks which raise the primary fiscal balance ratio by one percentage point. All variables are annualized, where applicable.
Figure 21.
Figure 21.

IRFs of Macro Variables to a Domestic Lending Rate Markup Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic lending rate markup shocks which raise the nominal bank lending rate by one percentage point. All variables are annualized, where applicable.
Figure 22.
Figure 22.

IRFs of Financial Variables to a Domestic Lending Rate Markup Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic lending rate markup shocks which raise the nominal bank lending rate by one percentage point. All variables are annualized, where applicable.
Figure 23.
Figure 23.

IRFs of Macro Variables to a Domestic Capital Requirement Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic capital requirement shocks which raise the regulatory bank capital ratio by one percentage point. All variables are annualized, where applicable.
Figure 24.
Figure 24.

IRFs of Financial Variables to a Domestic Capital Requirement Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic capital requirement shocks which raise the regulatory bank capital ratio by one percentage point. All variables are annualized, where applicable.
Figure 25.
Figure 25.

IRFs of Macro Variables to a Domestic Loan Default Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to domestic loan default shocks which raise the loan default rate by one percentage point. All variables are annualized, where applicable.
Figure 26.
Figure 26.

IRFs of Financial Variables to a Domestic Loan Default Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to domestic loan default shocks which raise the loan default rate by one percentage point. All variables are annualized, where applicable.
Figure 27.
Figure 27.

IRFs of Macro Variables to an Energy Commodity Price Markup Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to a world energy commodity price markup shock which raises the price of energy commodities by ten percent. All variables are annualized, where applicable.
Figure 28.
Figure 28.

IRFs of Financial Variables to an Energy Commodity Price Markup Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to a world energy commodity price markup shock which raises the price of energy commodities by ten percent. All variables are annualized, where applicable.
Figure 29.
Figure 29.

IRFs of Macro Variables to a Nonenergy Commodity Price Markup Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of consumption price inflation (lhs), output (lhs), private consumption (lhs), private investment (rhs), the nominal policy interest rate (lhs), the real effective exchange rate (lhs), the unemployment rate (lhs), the fiscal balance ratio (lhs), and the current account balance ratio (lhs) to a world nonenergy commodity price markup shock which raises the price of nonenergy commodities by ten percent. All variables are annualized, where applicable.
Figure 30.
Figure 30.

IRFs of Financial Variables to a Nonenergy Commodity Price Markup Shock

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the impulse responses of the short term nominal market interest rate (lhs), the long term nominal market interest rate (lhs), the relative price of equity (rhs), the real money stock (lhs), real bank credit (lhs), the nominal bank lending rate (lhs), the bank capital ratio (lhs), and the credit loss rate (lhs) to a world nonenergy commodity price markup shock which raises the price of nonenergy commodities by ten percent. All variables are annualized, where applicable.
Figure 31.
Figure 31.

Historical Decompositions of Consumption Price Inflation

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Decomposes observed consumption price inflation as measured by the seasonal logarithmic difference of the price of consumption into the sum of a trend component and contributions from domestic supply , foreign supply , domestic demand , foreign demand , world monetary policy , domestic fiscal policy , foreign fiscal policy , domestic financial , foreign financial , and world terms of trade shocks.
Figure 32.
Figure 32.

Historical Decompositions of Output Growth

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Decomposes observed output growth as measured by the seasonal logarithmic difference of output into the sum of a trend component and contributions from domestic supply , foreign supply , domestic demand , foreign demand , world monetary policy , domestic fiscal policy , foreign fiscal policy , domestic financial , foreign financial , and world terms of trade shocks.
Figure 33.
Figure 33.

Simulated Conditional Betas of Output

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the betas of output with respect to contemporaneous output in systemic economies conditional on selected macroeconomic and financial shocks , selected macroeconomic shocks , and selected financial shocks in each of these systemic economies. These betas are calculated with a Monte Carlo simulation with 999 replications for 2T periods, discarding the first T simulated observations to eliminate dependence on initial conditions, where T denotes the observed sample size.
Figure 34.
Figure 34.

Peak IRFs to Foreign Productivity Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to productivity shocks in systemic economies which raise their output price inflation by one percentage point. All variables are annualized, where applicable.
Figure 35.
Figure 35.

Peak IRFs to Foreign Labor Supply Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to labor supply shocks in systemic economies which raise their labor force by one percent. All variables are annualized, where applicable.
Figure 36.
Figure 36.

Peak IRFs to Foreign Consumption Demand Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to consumption demand shocks in systemic economies which raise their private consumption by one percent. All variables are annualized, where applicable.
Figure 37.
Figure 37.

Peak IRFs to Foreign Investment Demand Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to investment demand shocks in systemic economies which raise their private investment by one percent. All variables are annualized, where applicable.
Figure 38.
Figure 38.

Peak IRFs to Foreign Monetary Policy Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to monetary policy shocks in systemic economies which raise their nominal policy interest rate by one percentage point. All variables are annualized, where applicable.
Figure 39.
Figure 39.

Peak IRFs to Foreign Credit Risk Premium Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to credit risk premium shocks in systemic economies which raise their short term nominal market interest rate by one percentage point. All variables are annualized, where applicable.
Figure 40.
Figure 40.

Peak IRFs to Foreign Duration Risk Premium Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to duration risk premium shocks in systemic economies which raise their long term nominal market interest rate by one percentage point. All variables are annualized, where applicable.
Figure 41.
Figure 41.

Peak IRFs to Foreign Equity Risk Premium Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to equity risk premium shocks in systemic economies which raise their price of equity by ten percent. All variables are annualized, where applicable.
Figure 42.
Figure 42.

Peak IRFs to Foreign Fiscal Expenditure Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to fiscal expenditure shocks in systemic economies which raise their primary fiscal balance ratio by one percentage point. All variables are annualized, where applicable.
Figure 43.
Figure 43.

Peak IRFs to Foreign Fiscal Revenue Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to fiscal revenue shocks in systemic economies which raise their primary fiscal balance ratio by one percentage point. All variables are annualized, where applicable.
Figure 44.
Figure 44.

Peak IRFs to Foreign Lending Rate Markup Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to lending rate markup shocks in systemic economies which raise their nominal bank lending rate by one percentage point. All variables are annualized, where applicable.
Figure 45.
Figure 45.

Peak IRFs to Foreign Capital Requirement Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to capital requirement shocks in systemic economies which raise their regulatory bank capital ratio by one percentage point. All variables are annualized, where applicable.
Figure 46.
Figure 46.

Peak IRFs to Foreign Loan Default Shocks

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the peak impulse responses of consumption price inflation , output , the real effective exchange rate , the fiscal balance ratio , and the current account balance ratio to loan default shocks in systemic economies which raise their loan default rate by one percentage point. All variables are annualized, where applicable.
Figure 47.
Figure 47.

Forecast Performance Evaluation Statistics

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the horizon dependent logarithmic root mean squared prediction error ratio for consumption price inflation and output growth relative to a random walk, expressed in percent.
Figure 48.
Figure 48.

Sequential Unconditional Forecasts of Consumption Price Inflation

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the cyclical component of observed consumption price inflation as measured by the seasonal difference of the cyclical component of the logarithm of the price of consumption versus sequential unrestricted forecasts .
Figure 49.
Figure 49.

Sequential Unconditional Forecasts of Output Growth

Citation: IMF Working Papers 2015, 227; 10.5089/9781513537429.001.A999

Note: Depicts the cyclical component of observed output growth as measured by the seasonal difference of the cyclical component of the logarithm of output versus sequential unrestricted forecasts .

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1

The author gratefully acknowledges advice provided by Tamim Bayoumi and Peter Dattels, as well as comments and suggestions received from seminar participants at the Bank of Canada and the IMF.

2

In steady state equilibrium Ai=viC=viI=viX=viB=viS=viɛ=1,viiP=υiiS=viG=viT=vik=viδ=0,viM=θMθM1, and σθY2=σθM2=σθL2=σA2=σvC2=σvI2=σvX2=σvM2=σvi,p2=σvi,s2=σvB2=σvS2=σvɛ2=σvL2=σvG2=σvT2=σθC2=σvk2=σvδ2=σvY,k2=0

3

The nominal effective exchange rate lnɛ^i,t satisfies lnɛ^i,tΣj=1Nwi,jTlnɛ^j,i*,t, while the real effective exchange rate lnQ^i,t satisfies lnQ^i,tlnQ^i,i*,tΣj=1Nwi,jTlnQ^j,i*,t.

Macrofinancial Analysis in the World Economy: A Panel Dynamic Stochastic General Equilibrium Approach
Author: Mr. Francis Vitek