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-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -0.25 -0.20 -0.15 -0.10 -0.05 0.00 0.05 0.10 0.15
3 6 9 12 15
Years
%
Real wage
Real product wage
-0.20 -0.15 -0.10 -0.05 0.00 0.05 0.10 0.15 0.20 0.25 0.30
3 6 9 12 15
Years
%-p
oin
t
Real interest rate
Nominal interest rate
-0.5 0.0 0.5 1.0 1.5 2.0
3 6 9 12 15
%-po
int
Government debt/GDP
Government net lending/GDP
-0.05 0.00 0.05 0.10 0.15 0.20
3 6 9 12 15
Years
%
-poi
nt
Inflation, CPI deflator Inflation, GDP deflator
-0.06 -0.05 -0.04 -0.03 -0.02 -0.01 0.00
3 6 9 12 15
Years %-p oin t Unemployment -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
3 6 9 12 15
Years
%
Real exchange rate Nominal exchange rate
-15 -10 -5 0
3 6 9 12 15
%-po
int
Current account/GDP
[image:26.595.35.571.100.767.2]Net foreign assets/GDP
Figure 1: A shock from government policy in the form of a permanent increase in
public consumption equivalent to 1% of GDP
-14.0 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -2.50 -2.00 -1.50 -1.00 -0.50 0.00
3 6 9 12 15
Years
% Real wage
Real product wage
-3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00
3 6 9 12 15
Years
%
-poi
nt
Real interest rate
Nominal interest rate
-0.5 0.0 0.5 1.0 1.5 2.0
3 6 9 12 15
%-p o in t Government debt/GDP Government net lending/GDP
-1.80 -1.60 -1.40 -1.20 -1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40
3 6 9 12 15
Years
%
-p
o
in
t Inflation, CPI deflator
Inflation, GDP deflator
0.00 0.05 0.10 0.15 0.20 0.25 0.30
3 6 9 12 15
Years %-p o in t Unemployment -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0
3 6 9 12 15
Years
%
Real exchange rate
Nominal exchange rate
[image:27.595.35.574.93.776.2]20 40 60 80 100 120 140 160 % -poi nt Current account/GDP Net foreign assets/GDP
Figure 2: A domestic shock in the form of permanent increase in equity
premium by 1%-point
-0.1 0.0 0.1 0.2 0.3 0.4 0.5
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment 0.00 0.01 0.01 0.02 0.02 0.03 0.03 0.04 0.04 0.05 0.05
3 6 9 12 15
Years
%
Real wage
Real product wage
-0.05 0.00 0.05
3 6 9 12 15
Years
%-p
oin
t
Real interest rate Nominal interest rate
0.0 0.0 0.0 0.0 0.0 0.0 0.0
3 6 9 12 15
%-p o in t Government debt/GDP Government net lending/GDP
-0.05 0.00 0.05
3 6 9 12 15
Years
%
-poi
nt
Inflation, CPI deflator Inflation, GDP deflator
-0.01 -0.01 0.00 0.00 0.00 0.00 0.00 0.00
3 6 9 12 15
Years % -point Unemployment -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0.0
3 6 9 12 15
Years
%
Real exchange rate Nominal exchange rate
0
3 6 9 12 15
%
-point
Current account/GDP
[image:28.595.37.567.88.777.2]Net foreign assets/GDP
Figure 3: A foreign shock in the form of a permanent increase in
World demand by 1%
-2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -0.60 -0.50 -0.40 -0.30 -0.20 -0.10 0.00
3 6 9 12 15
Years
%
Real wage
Real product wage
-1.00 -0.50 0.00 0.50 1.00 1.50 2.00
3 6 9 12 15
Years
%-p
oin
t
Real interest rate
Nominal interest rate
-0.5 0.0 0.5 1.0 1.5 2.0 2.5
3 6 9 12 15
%-po
int
Government debt/GDP
Government net lending/GDP
-0.50 -0.40 -0.30 -0.20 -0.10 0.00 0.10
3 6 9 12 15
Years
%
-poi
nt
Inflation, CPI deflator
Inflation, GDP deflator
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80
3 6 9 12 15
Years %-po int Unemployment -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0
3 6 9 12 15
Years
%
Real exchange rate
Nominal exchange rate
-1 0 1
3 6 9 12 15
%-po
int
Current account/GDP
[image:29.595.39.577.102.755.2]Net foreign assets/GDP
Figure 4: A temporary shock in the form of a two years increase in interest rates
by 1%-point
-0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment 0.00 0.02 0.04 0.06 0.08 0.10 0.12
3 6 9 12 15
Years
%
Real wage
Real product wage
-1.50 -1.00 -0.50 0.00 0.50 1.00 1.50
3 6 9 12 15
Years
%
-poi
nt
Real interest rate Nominal interest rate
-0.6 -0.4 -0.2 0.0 0.2 0.4
3 6 9 12 15
%-poi
nt
Government debt/GDP
Government net lending/GDP
0.00 0.20 0.40 0.60 0.80 1.00 1.20
3 6 9 12 15
Years
%
-point
Inflation, CPI deflator Inflation, GDP deflator
-0.10 -0.09 -0.08 -0.07 -0.06 -0.05 -0.04 -0.03 -0.02 -0.01 0.00
3 6 9 12 15
Years %-po in t Unemployment 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0
3 6 9 12 15
Years
%
Real exchange rate Nominal exchange rate
[image:30.595.37.573.99.767.2]1 2 % -poi nt Current account/GDP Net foreign assets/GDP
Figure 5a: An exploration of the importance of credibility in the form of a monetary policy
shock of a 1%-point increase in inflation target when the central bank is credible
-0.5 -0.4 -0.3 -0.2 -0.1 0.0
3 6 9 12 15
Years
%
Imports Consumption
GDP Investment Exports
-0.03 -0.03 -0.02 -0.02 -0.01 -0.01 0.00
3 6 9 12 15
Years
%
Real wage
Real product wage
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.55
3 6 9 12 15
Years %-p o in t
Real interest rate
Nominal interest rate
-0.40 -0.20 0.00 0.20 0.40 0.60 0.80
3 6 9 12 15
%-po
int
Government debt/GDP
Government net lending/GDP
-0.03 -0.02 -0.01 0.00 0.01
3 6 9 12 15
Years
%
-po
int
Inflation, CPI deflator
Inflation, GDP deflator
0.000 0.005 0.010 0.015 0.020 0.025
3 6 9 12 15
Years %-poi nt Unemployment -0.2 -0.1 0.0 0.1 0.2
3 6 9 12 15
Years
%
Real exchange rate Nominal exchange rate
[image:31.595.38.572.89.773.2]0 1 2 3 4 5 6 % -point Current account/GDP Net foreign assets/GDP
-0.5 -0.4 -0.3 -0.2 -0.1 0.0 0.1
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -0.03 -0.02 -0.02 -0.01 -0.01 0.00 0.01
3 6 9 12 15
Years
%
Real wage Real product wage
0.00 0.05 0.10 0.15 0.20
3 6 9 12 15
Years
%-poin
t
Real interest rate
Nominal interest rate
-0.10 -0.05 0.00 0.05 0.10 0.15
3 6 9 12 15
%-po
int
Government debt/GDP
Government net lending/GDP
-0.03 -0.02 -0.01 0.00 0.01 0.02
3 6 9 12 15
Years
%
-poi
nt
Inflation, CPI deflator
Inflation, GDP deflator
0.000 0.002 0.004 0.006 0.008 0.010 0.012
3 6 9 12 15
Years %-poi nt Unemployment -0.1 0.0 0.1 0.2 0.3
3 6 9 12 15
Years
%
Real exchange rate
Nominal exchange rate
[image:32.595.39.568.103.763.2]0 1 2 3 4 5 6 % -poin t Current account/GDP Net foreign assets/GDP
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -0.5 -0.4 -0.3 -0.2 -0.1 0.0 0.1 0.2
3 6 9 12 15
Years
%
Real wage
Real product wage Nominal wage -0.30 -0.25 -0.20 -0.15 -0.10 -0.05 0.00 0.05 0.10
3 6 9 12 15
Years
%-p
oin
t
Real interest rate
Nominal interest rate
-0.6 -0.4 -0.2 0.0 0.2 0.4
3 6 9 12 15
%
-poi
nt
Government debt/GDP Government net lending/GDP
-0.14 -0.12 -0.10 -0.08 -0.06 -0.04 -0.02 0.00 0.02 0.04 0.06
3 6 9 12 15
Years
%-poin
t
Inflation, CPI deflator
Inflation, GDP deflator
-1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0
3 6 9 12 15
Years %-p oin t Unemployment rate 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80
3 6 9 12 15
Years
%
Real exchange rate Nominal exchange rate
-1.60 -1.40 -1.20 -1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20
3 6 9 12 15
%-p
oin
t
Current account/GDP
[image:33.595.37.567.99.770.2]Net foreign assets/GDP
Figure 6a: A Permanent fall in NAIRU by 1.0%-point
Central Bank does see the fall in NAIRU
-0.10 -0.08 -0.06 -0.04 -0.02 0.00 0.02 0.04
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -0.030 -0.025 -0.020 -0.015 -0.010 -0.005 0.000 0.005
3 6 9 12 15
Years
%
Real wage
Real product wage
Nominal wage 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35
3 6 9 12 15
Years
%-po
int
Real interest rate
Nominal interest rate
-0.2 0.0 0.2 0.4
3 6 9 12 15
%
-po
int
Government debt/GDP
Government net lending/GDP
-0.007 -0.006 -0.005 -0.004 -0.003 -0.002 -0.001 0.000 0.001 0.002 0.003 0.004
3 6 9 12 15
Years
%-poin
t
Inflation, CPI deflator Inflation, GDP deflator
0.000 0.002 0.004 0.006 0.008 0.010 0.012
3 6 9 12 15
Years %-po int Unemployment rate -0.08 -0.07 -0.06 -0.05 -0.04 -0.03 -0.02 -0.01 0.00
3 6 9 12 15
Years
%
Real exchange rate Nominal exchange rate
-0.45 -0.40 -0.35 -0.30 -0.25 -0.20 -0.15 -0.10 -0.05 0.00
3 6 9 12 15
%-p
oin
t
Current account/GDP
[image:34.595.36.578.99.770.2]Net foreign assets/GDP
Figure 6b: A Permanent fall in NAIRU by 1.0%-point
Myopic vs. Sharp-eyed Central Bank
-0.25 -0.20 -0.15 -0.10 -0.05 0.00 0.05 0.10 0.15
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -0.07 -0.06 -0.05 -0.04 -0.03 -0.02 -0.01 0.00 0.01
3 6 9 12 15
Years
%
Real wage
Real product wage
Nominal wage -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2
3 6 9 12 15
Years
%-p
oin
t Real interest rate Nominal interest rate
-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0
3 6 9 12 15
%
-poi
nt
Government debt/GDP
Government net lending/GDP
-0.012 -0.010 -0.008 -0.006 -0.004 -0.002 0.000 0.002 0.004 0.006 0.008
3 6 9 12 15
Years
%-poi
nt
Inflation, CPI deflator
Inflation, GDP deflator
-0.010 -0.005 0.000 0.005 0.010 0.015 0.020 0.025 0.030 0.035 0.040
3 6 9 12 15
Years % -po in t Unemployment rate -0.25 -0.20 -0.15 -0.10 -0.05 0.00 0.05 0.10 0.15
3 6 9 12 15
Years
%
Real exchange rate
Nominal exchange rate
-0.2 0.0 0.2 0.4 0.6 0.8 1.0
3 6 9 12 15
%-p
oin
t
Current account/GDP
[image:35.595.34.579.91.767.2]Net foreign assets/GDP
Figure 7a: An exploration of learning in the form of a 1%-point reduction in
the real rate of interest when the central bank fails to realise it
-0.30 -0.20 -0.10 0.00 0.10 0.20 0.30 0.40
3 6 9 12 15
Years % Imports Consumption GDP Exports Investment -0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80
3 6 9 12 15
Years % Real wage
Real product wage Nominal wage -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4
3 6 9 12 15
Years
%
-poi
nt
Real interest rate Nominal interest rate
-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0
3 6 9 12 15
%
-poi
nt
Government debt/GDP
Government net lending/GDP
-0.050 0.000 0.050 0.100 0.150 0.200 0.250 0.300
3 6 9 12 15
Years
%-poi
nt
Inflation, CPI deflator Inflation, GDP deflator
-0.180 -0.160 -0.140 -0.120 -0.100 -0.080 -0.060 -0.040 -0.020 0.000 0.020 0.040
3 6 9 12 15
Years % -po in t Unemployment rate -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00
3 6 9 12 15
Years
%
Real exchange rate Nominal exchange rate
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 % -poi nt Current account/GDP
[image:36.595.42.573.99.758.2]Net foreign assets/GDP
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Table 2
([SRVWVLPXODWLRQDFFXUDF\RIWKHVWHDG\VWDWHPRGHO
MD MAD RMSE MAPE
Real GDP Y -29567 29567 32625 0,0211
Private consumption C 16561 20642 24245 0,0258 Fixed investment I -8593 9339 10262 0,0315
Exports X 2756 9871 11679 0,0207
Imports M 31290 31351 34806 0,0709
GDP deflator P 0,0059 0,0059 0,0072 0,0057 Consumer price deflator PC 0,0073 0,0073 0,0086 0,0070 Investment price deflator PI -0,0001 0,0036 0,0039 0,0035 Export price deflator PX 0,0243 0,0257 0,0283 0,0255 Import price deflator PM 0,0264 0,0264 0,0283 0,0262 Quarterly inflation rate INFQ/100 0,0000 0,0026 0,0032 * Annual inflation rate INFY 1,0550 1,0550 1,0625 * Real wages WR -0,0998 0,0998 0,1341 0,0165
Unemployment rate U/100 -0,0003 0,0027 0,0031 *
Labour demand L 30 349 399 0,0030
Nominal exchange rate e -0,0206 0,0339 0,0479 0,0326 Nominal interest rate R 0,6659 0,6997 0,8997 *
Budget deficit to GDP GLN/YEN -0,0032 0,0034 0,0052 * Public debt to GDP GDN/YEN -0,1427 0,1427 0,1489 *
Current account to GDP CAN/YEN -0,0112 0,0112 0,0139 * Net foreign assets/GDP NFA/YEN -0,3271 0,4113 0,6244 *
* NA
MD = mean deviation
MAD = mean absolute deviation
RMSE = root mean square error
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31358 Wkh frh!flhqw ri wkh ixqgdphqw lq oderxu ghpdqg htxdwlrq 031657 Wkh frh!flhqw ri wkh vhfrqg ohdg lq lqyhvwphqw htxdwlrq 31<;9 Wkh frh!flhqw ri wkh ohdg lq lqyhvwphqw htxdwlrq 3166:; Wkh frh!flhqw ri wkh odj lq lqyhvwphqw htxdwlrq
313338 Wkh frh!flhqw ri wkh ixqgdphqw lq lqyhvwphqw htxdwlrq 317< Wkh frh!flhqw ri wkh ohdg lq zdjh htxdwlrq
318 Wkh frh!flhqw ri wkh odj lq zdjh htxdwlrq
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Table 4
'DWD6RXUFHV
0RGHO
FRGH 752//FRGH ([SODQDWLRQ 6RXUFH
A AST Asset wealth Own calculation
C PCR Real consumption ECB Monthly Bulletin Table 5.1 c12 CA CAN Current account - " - Table 8.1 c1 CG GCR Real public consumption - " - Table 5.1 c13 DD FDD Real domestic demand - " - Table 5.1 c11 e EEN Nominal effective exchange rate - " - Table 10 c1 g g Real growth in steady-state Own calculation
GCN GCN Nominal public consumption ECB Monthly Bulletin Table 5.1 c4 GDN GDN Nominal public debt - " - Table 7.2 c1 GIN GIN Nominal public investment - " - Table 7.1 c11 GLN GLN Public net lending GYN – GIN - GCN
GOY GOY Nominal public other income ECB Monthly Bulletin Table 7.1 c8 + 7.1 c11 + 7.1 c12 GYN GYN Nominal public dispos. income TAX + TIN + GOY - TRF - INN
I ITR Real investment ECB Monthly Bulletin Table 5.1 c14 IG GIR Real public investment GIN / PI
INN INN Nominal public inter. outlays ECB Monthly Bulletin Table 7.1 2 c5 K KSR Fixed capital stock (1-N)tK(-1)+ I
AKI DLSR Change in inventories ECB Monthly Bulletin Table 5.1 c15 KI LSR Inventories KI(-1)+ AKI
N LFN Labour force ECB Monthly Bulletin Table 5.4 c7 / 5.4 c8 L LNN Labour demand N – Table 5.4 c7
M MTR Imports ECB Monthly Bulletin Table 5.1 c18 NFA NFA Net foreign assets - " - Table 8.7 c1
NFN NFN Net factor income from abroad - " - Table 8.1 c4 + 8.1 c5 P YED GDP deflator - " - Table 5.1 c1 / 5.1 c10 PC PCD Consumer price deflator - " - Table 5.1 c3 / 5.1 c12
PC* COMPR World commodity prices HWWA-Institut fur Wirtschaftsforschung, HWWA Raw mate-rials price index, 1990=100, USD, rebased (1995=100) PF YFD GDP deflator at factor price Pt(1-
τ
LQGLUHFW)P* YWD World GDP deflator OECD Economic Outlook
PM MTD Import price deflator ECB Monthly Bulletin Table 5.1 c9 / 5.1 c18 PI ITD Investment deflator - " - Table 5.1 c5 / 5.1 c14 PX XTD Export price deflator - " - Table 5.1 c8 / 5.1 c17
π
INFQ Quarterly inflation rate log (PC/PC(-1))π
INFT Quarterly inflation target Own calculation R STRQ Domestic real interest rate R / 400 –π
r* STRQF Foreign real interest rate R* / 400 - log (P*/P*(-1))
R STN Domestic nominal interest rate ECB Monthly Bulletin Table 3.1 c3 R* STNF Foreign nominal interest rate - " - Table 3.1 c6 T TFT Technical progress Solow residual
TAX TAX Direct taxes by households ECB Monthly Bulletin Table 7.1 1 c3 GLUHFW
τ
TAR Direct tax rate TAX/YEN LQGLUHFWτ
TIR Indirect tax rate TIN/YENTIN TIN Indirect taxes ECB Monthly Bulletin Table 7.1 1 c6 TRF TRF Public transfers - " - Table 7.1 2 c6 U URX Unemployment - " - Table 5.4 c8
8
URT NAIRU Hodric-Prescott (1600) filtered U WN WIN/L Nominal wages per employeeWIN Nominal wage sum Eurostat new_cronos
χ
χ
Equity premium Own calculationX XTR Exports ECB Monthly Bulletin Table 5.1 c17 Y YER Real GDP - " - Table 5.1 c10 Y* YWR Real World GDP OECD Economic Outlook
YDN YDN Nominal private dispos. income YFN-TAX+INN+TRF-GOY+NFN-NtPItK YEN YEN Nominal GDP ECB Monthly Bulletin Table 5.1 c10 * P
