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The paper introduces “system priors”, their use in Bayesian analysis of econometric time series, and provides a simple and illustrative application. System priors were devised by Andrle and Benes (2013) as a tool to incorporate prior knowledge into an economic model. Unlike priors about individual parameters, system priors offer a simple and efficient way of formulating well-defined and economically-meaningful priors about high-level model properties. The generality of system priors are illustrated using an AR(2) process with a prior that most of its dynamics comes from business-cycle frequencies.

Econometrics. --- Economics, Mathematical --- Statistics --- Macroeconomics --- Bayesian Analysis: General --- Model Construction and Estimation --- Methodological Issues: General --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Economic growth --- Business cycles

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This is the sixth of a series of papers that are being written as part of a project to estimate a small quarterly Global Projection Model (GPM). The GPM project is designed to improve the toolkit to which economists have access for studying both own-country and cross-country linkages. In this paper, we add three more regions and make a number of other changes to a previously estimated small quarterly projection model of the US, euro area, and Japanese economies. The model is estimated with Bayesian techniques, which provide a very efficient way of imposing restrictions to produce both plausible dynamics and sensible forecasting properties.

Business & Economics --- Economic History --- Economic policy --- Economics --- Mathematical models. --- Economics, Mathematical --- Banks and Banking --- Foreign Exchange --- Inflation --- Production and Operations Management --- Model Construction and Estimation --- Price Level --- Deflation --- Monetary Policy --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Macroeconomics --- Currency --- Foreign exchange --- Finance --- Banking --- Real exchange rates --- Output gap --- Real interest rates --- Central bank policy rate --- Production --- Financial services --- Prices --- Interest rates --- Economic theory --- United States

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We suggest a new approach for analyzing the role of financial variables and shocks in computing the output gap. We estimate a two-region DSGE model for the euro area, with financial frictions at the household level, between 2000-2013. After joining the monetary union, a decline in some countries’ borrowing costs contributed to a credit, housing and real boom and bust cycle. We show that financial frictions amplified economic fluctuations and the measure of the output gap in those countries. On the contrary, in countries such as France and Germany, financial frictions played a minor role in output gap measures. We also present evidence of the trade-offs faced by the European Central Bank when trying to stabilize two regions in a currency union with unsynchronized economic cycles.

Monetary policy --- Business cycles --- Economic cycles --- Economic fluctuations --- Cycles --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Econometric models. --- Inflation --- Infrastructure --- Real Estate --- Production and Operations Management --- Macroeconomics: Production --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Housing --- Housing Supply and Markets --- Price Level --- Deflation --- Model Construction and Estimation --- Business Fluctuations --- Monetary Policy --- Macroeconomics --- Property & real estate --- Output gap --- Housing prices --- Potential output --- National accounts --- Production --- Prices --- Economic theory --- Saving and investment --- Spain

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House prices in many advanced economies have risen substantially in recent decades. But experience indicates that housing prices can diverge from their long-run equilibrium or sustainable levels, potentially followed by adjustments that impact macroeconomic and financial stability. Therefore there is a need to monitor house prices and assess whether they are sustainable. This paper focuses on fundamentals expected to drive long run trends in house prices, including institutional and structural factors. The scale of potential valuation gaps is gauged on the basis of a cross-country panel analysis of house prices in 20 OECD countries.

Infrastructure --- Macroeconomics --- Real Estate --- Industries: Financial Services --- Multiple or Simultaneous Equation Models: Models with Panel Data --- Model Construction and Estimation --- Macroeconomics: Consumption --- Saving --- Wealth --- Urban, Rural, and Regional Economics: Housing Demand --- Housing Supply and Markets --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Housing --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Personal Income, Wealth, and Their Distributions --- Price Level --- Inflation --- Deflation --- Property & real estate --- Finance --- Housing prices --- Disposable income --- Asset prices --- Prices --- National accounts --- Financial institutions --- Saving and investment --- National income --- Sweden --- E-books

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This paper develops a structural macroeconometric model of the world economy, disaggregated into forty national economies. This panel dynamic stochastic general equilibrium model features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. A variety of monetary policy analysis, fiscal policy analysis, spillover analysis, and forecasting applications of the estimated model are demonstrated. These include quantifying the monetary and fiscal transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.

Free trade. --- International Monetary Fund. --- World Bank. --- Finance --- Business & Economics --- International Finance --- Capital movements --- Monetary policy --- Fiscal policy --- Business cycles --- Econometric models. --- Tax policy --- Taxation --- Capital flight --- Capital flows --- Capital inflow --- Capital outflow --- Flight of capital --- Flow of capital --- Movements of capital --- Government policy --- Economic policy --- Finance, Public --- Balance of payments --- Foreign exchange --- International finance --- Economic forecasting --- Computable general equilibrium models --- Panel analysis --- Econometric models --- E-books --- Panel studies --- Social sciences --- Statistics --- CGE models --- Equilibrium models, Computable general --- General equilibrium models, Computable --- Methodology --- Banks and Banking --- Econometrics --- Exports and Imports --- Investments: General --- Macroeconomics --- Inflation --- Bayesian Analysis: General --- Multiple or Simultaneous Equation Models: Models with Panel Data --- Model Construction and Estimation --- Forecasting and Other Model Applications --- Price Level --- Deflation --- Business Fluctuations --- Cycles --- Financial Markets and the Macroeconomy --- Monetary Policy --- Fiscal Policy --- Open Economy Macroeconomics --- Empirical Studies of Trade --- Investment --- Capital --- Intangible Capital --- Capacity --- Macroeconomics: Consumption --- Saving --- Wealth --- Computable and Other Applied General Equilibrium Models --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- Econometrics & economic statistics --- Banking --- Terms of trade --- Return on investment --- Consumption --- Dynamic stochastic general equilibrium models --- Central bank policy rate --- National accounts --- International trade --- Econometric analysis --- Prices --- nternational cooperation --- Saving and investment --- Economics --- Interest rates --- United Kingdom --- Nternational cooperation