The document describes a new multi-country macroeconomic model called MCMAP developed for analyzing economic interactions between OECD countries. MCMAP combines elements of New Keynesian and New Open Economy Macroeconomics models within a Dynamic Stochastic General Equilibrium framework. It models 34 OECD economies and allows for analysis of cross-country effects of monetary, fiscal and financial shocks. The model is implemented on a flexible Matlab/Dynare computing platform and can be used to simulate scenarios and policy tradeoffs between countries and regions.

1. Multi-Country Macroeconomic Analysis Platform:
a new DSGE model for OECD economies
Edgar Mata Flores,
Department of Economics

2. What is it?

3. Definition
• Combining New Keynesian and New Open Economy Macroeconomics
modelling structures, MCMAP is a macro-econometric computing
platform for the analysis of international economic and financial
interactions in OECD countries

4. Configuration
• Based on the Dynamic Stochastic General Equilibrium framework
• Contributes to the last link in the DSGE evolutionary chain:
Christiano et
al. (2005)
Adolfson et al.
(2007)
MCMAP
(2015)
• Optimising agents
• Nominal rigidities
• Real rigidities
• Monetary policy
• Closed economy
• Open economy
• Variable capital
utilisation
• Working capital
channel
• Monetary and fiscal
policies
• Multi-country
• National, regional
and global shocks
• Heterogeneous
economies and
linkages
• Credit markets and
financial frictions

5. Main features

6. Global approach
• Countries and regions constitute networks across the global economy
(currently represented by OECD economies)
• The strength and direction of commercial and financial exchanges help
to determine the roles in the international net of interactions
• Allows for regional shocks both with and without monetary unions
• If shocks affect all regions, they become global
• The impacts are shown at the national level

7. Macroeconomic policies
• Evaluates the international impacts of shocks from monetary and fiscal
policies
• Uses adjusted Taylor rules, considering interest rate spreads (based on
a comparative international risk premium)
• While it allows for monetary unions, national economies retain their
remaining individual features (no need for an Euro-country)
• A complex fiscal formulation including taxation on consumption, wages,
payroll and capital as well as government expenditure

8. Financial markets
• Financial intermediation is added on the basis of an extended and
modified version of Gertler and Kiyotaki (2010) which accounts for
financial frictions
• Reflects the relevance of international financial exchanges and the
conditions in the retail and wholesale (inter-bank) credit markets
• It also shows the implications for monetary policies acting through
interest rates or liquidity interventions

9. The computing platform

10. Flexibility
• Developed in the Matlab/Dynare computing platform provides flexibility
for the definition of regions and the global economy
• Automatically calculates country-specific foreign variables accordingly
• Accumulates knowledge: can be used to perform further estimations or
(with the currently available results) stochastic simulations of
international scenarios
• Can be adapted to multi-threading computing frameworks

11. Coverage
• The platform is ready to perform simulations on 34 OECD economies
• Bayesian estimations have been performed on 3 regions:
– NAFTA (Canada, Mexico, United States)
– Europe (Belgium, France, Germany, Netherlands, Spain)
– Asia-Pacific (Australia, Japan, Korea)
• by the means of which their country-level parameterisations have been
enhanced
• 24 national and 13 regional policy and macroeconomic shocks are
available for the simulation of scenarios

12. Examples of applications
What is the effect
in Canada and
Mexico of a
monetary policy
shock in the US?
What are the
nominal effects in
Canada and
Mexico of an
income tax shock
in the US?
What is the effect
in Asia-Pacific of a
global slowdown?
What is the effect
in NAFTA of global
inflation?
What are the
nominal effects of
fiscal policies in
Euro countries?
How does a
monetary shock in
Japan affect the
US economy?
How fiscal
changes in Japan
affect Australia and
Korea?
How credit
markets in NAFTA
and Europe react
to monetary and
liquidity policies in
the US?

13. Further information
• Edgar Mata
emf6@leicester.ac.uk
• My research website:
https://sites.google.com/site/edgarmataeconomist

14. References
• Adolfson, M., Laseen, S. and Linde, J. (2007). Bayesian Estimation of an Open
Economy DSGE Model with Incomplete Pass-Through. Journal of International
Economics, Vol. 72, Issue 2, p. 481-511. July.
• Christiano, L. J., Eichenbaum, M. and Evans, Ch. L. (2005). Nominal Rigidities
and the Dynamic Effects of a Shock to Monetary Policy. Journal of Political
Economy, Vol. 113, No. 1, p. 1-45.
• Gertler, M. and Kiyotaki, N. (2010). Financial Intermediation and Credit Policy in
Business Cycle Analysis. In Friedman, B. M. and Woodford, M. (Eds.)
Handbook of Monetary Economics, Vol. 3A, Ch. 11, p.547-599. North-Holland,
Amsterdam.