Sources of Macroeconomic Fluctuations in MENA Countries
AbstractA close examination of the MENA region economies reveals a number of fundamental sources of macroeconomic fluctuations. These include economic factors such as exchange rate instability, large public debt, current account deficits, and escalation of inflation. The political factors such as government instability, corruption, bureaucracy, and internal conflicts also are major sources of macroeconomic instability. Thus, the sources of macroeconomic fluctuations in these countries are expected to be inhomogeneous. This paper determines sources of macroeconomic fluctuations for 16 MENA economies using a structural VAR model. By imposing long-run restrictions on a VAR model, we identify four structural shocks: nominal demand, relative demand, supply, the world output, and imported input price shocks. Overall, the results show some similarities for the source of macroeconomic fluctuations in these, but also some important differences as well. We find important differences even among countries with similar macroeconomic conditions, such as the oil exporters and oil importers. Although, oil prices and world output are significant sources of macroeconomic fluctuations in oil exporters, in almost all countries they do not have the highest share. There is one clear common finding of the paper: For all countries, the long-run sources of output fluctuations are the real supply and/or real demand shocks. External shocks are secondary for all countries. The sources of short-run and price fluctuations are inhomogeneous and dominant variables are mostly determined by country specific factors.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 44351.
Date of creation: Jan 2010
Date of revision:
MENA; business cycle; Structural VAR; small open economy macroeconomic model;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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