A Global Trade Model for the Euro Area

FEDS Working Paper No. 2015-013


35 Pages Posted: 19 Apr 2015

See all articles by Michele Modugno

Michele Modugno

Board of Governors of the Federal Reserve System

Chiara Osbat

European Central Bank (ECB)

Multiple version iconThere are 3 versions of this paper

Date Written: February 3, 2015


We propose a model for analyzing euro area trade based on the interaction between macroeconomic and trade variables. First, we show that macroeconomic variables are necessary to generate accurate short-term trade forecasts; this result can be explained by the high correlation between trade and macroeconomic variables, with the latter being released in a more timely manner. Second, the model tracks well the dynamics of trade variables conditional on the path of macroeconomic variables during the great recession; this result makes our model a reliable tool for scenario analysis. Third, we quantify the contribution of the most important euro area trading partners (regions) to the aggregate extra euro area developments: we evaluate the impact of an increase of the external demand from a specific region on the extra euro area trade.

Keywords: euro area trade, forecast, scenario analysis

JEL Classification: F17, F47, C38

Suggested Citation

Modugno, Michele and Osbat, Chiara, A Global Trade Model for the Euro Area (February 3, 2015). FEDS Working Paper No. 2015-013, http://dx.doi.org/10.17016/FEDS.2015.013, Available at SSRN: https://ssrn.com/abstract=2595731 or http://dx.doi.org/10.2139/ssrn.2595731

Michele Modugno (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Chiara Osbat

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
+49 69 1344 6821 (Phone)
+49 69 1344 6000 (Fax)

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