The emphasis is on equation-by-equation fit, while the cross-equation constraints are mostly ignored because they do not impinge on the model’s ability to provide sound quantitative predictions. When introducing financial frictions, we have relied on a reduced form representation that is consistent with different theoretical micro-foundations.
While economic activity in the euro area cannot be expected to improve significantly for the time being, the situation there will no longer exert a large negative impact on the global economy. 2. The United States  The U.S. economy has been on a moderate recovery trend against the backdrop of steady private demand, despite downward pressure from the fiscal side.