ECB-Global 2.0: A Global Macroeconomic Model with Dominant-Currency Pricing, Tariffs and Trade Diversion

50 Pages Posted: 5 Mar 2021

See all articles by Georgios Georgiadis

Georgios Georgiadis

European Central Bank (ECB)

Sebastian Hildebrand

University of Bonn

Martino Ricci

European Central Bank (ECB)

Ben Schumann

European Central Bank (ECB)

Björn van Roye

European Central Bank (ECB)

Date Written: March, 2021

Abstract

In a highly interlinked global economy a key question is how foreign shocks transmit to the domestic economy, how domestic shocks affect the rest of the world, and how policy actions mitigate or amplify spillovers. For policy analysis in such a context global multi-country macroeconomic models that allow a structural interpretation are needed. In this paper we present a revised version of ECB-Global, the European Central Bank's global macroeconomic model. ECB-Global 2.0 is a semi-structural, global multi-country model with rich channels of international shock propagation through trade, oil prices and global financial markets for the euro area, the US, Japan, the UK, China, oil-exporting economies, Emerging Asia, and a rest-of-the-world block. Relative to the original version of model, ECB-Global 2.0 features dominant-currency pricing, tariffs and trade diversion. We illustrate the usefulness of ECB-Global exploring scenarios motivated by recent trade tensions between China and the US.

JEL Classification: C51, E30, E50

Suggested Citation

Georgiadis, Georgios and Hildebrand, Sebastian and Ricci, Martino and Schumann, Ben and van Roye, Björn, ECB-Global 2.0: A Global Macroeconomic Model with Dominant-Currency Pricing, Tariffs and Trade Diversion (March, 2021). ECB Working Paper No. 2021/2530, Available at SSRN: https://ssrn.com/abstract=3797150

Georgios Georgiadis (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Sebastian Hildebrand

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Martino Ricci

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Ben Schumann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Björn Van Roye

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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