We propose a model for analyzing euro area trade based on the interaction betweenmacroeconomic and trade variables. First, we show that macroeconomic variables arenecessary to generate accurate short-term trade forecasts; this result can be explainedby the high correlation between trade and macroeconomic variables, with the latterbeing released in a more timely manner. Second, the model tracks well the dynamicsof trade variables conditional on the path of macroeconomic variables during the greatrecession; this result makes our model a reliable tool for scenario analysis. Third, wequantify the contribution of the most important euro area trading partners (regions)to the aggregate extra euro area developments: we evaluate the impact of an increaseof the external demand from a specific region on the extra euro area trade.
| Author: Federal Reserve Board |
| Publisher: Createspace Independent Publishing Platform |
| Publication Date: Apr 10, 2015 |
| Number of Pages: 36 pages |
| Binding: Paperback or Softback |
| ISBN-10: 1511660511 |
| ISBN-13: 9781511660518 |
