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Comparison of Various Business Cycle Models for Pakistan

Author

Listed:
  • M. Ali Choudhary

    (State Bank of Pakistan)

  • Sajawal Khan

    (State Bank of Pakistan)

  • Farooq Pasha

    (State Bank of Pakistan)

Abstract

In this paper, we compare the performance of different models, on two data frequencies, in terms of matching the business cycle moments of Pakistani economy. Out of the four models, two are simple real business cycle models for Pakistan introduced in Choudhary and Pasha (2013), and the other two are benchmark models [Aguiar and Gopinath (2007) and Garcia-Cicco et al. (2010)] from the literature for explaining the business cycles in emerging and developing economies. This paper calibrate these models for Pakistan and evaluate their performance in terms of matching second order moments from the actual data at both annual and quarterly frequency. We find that even though no single model is able to match all the relevant moments for all the important macroeconomic variables at both frequencies, the augmented RBC model with FDI shock (Choudhary and Pasha, 2013) performs relatively better.

Suggested Citation

  • M. Ali Choudhary & Sajawal Khan & Farooq Pasha, 2017. "Comparison of Various Business Cycle Models for Pakistan," SBP Working Paper Series 89, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:89
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    File URL: http://www.sbp.org.pk/publications/wpapers/2017/wp89.pdf
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    Keywords

    DSGE Model; Emerging Economies; FDI shock; Business Cycles;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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