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The transmission of external shocks to the Macedonian economic activity

Author

Listed:
  • Danica Unevska Andonova

    () (National Bank of the Republic of Macedonia)

  • Marija Petkovska

    () (National Bank of the Republic of Macedonia)

Abstract

Macroeconomists have been concerned with the structure of business cycle fluctuations and their sources for a long time. In a highly integrated and globalized world, the study of co-movement, or integration, is important because the results of the study on emerging countries could help policy-makers design more appropriate policies for those countries. In this study, we are trying to answer how much of economic volatility in Macedonia can be explained by shocks originating in the Euro area, as main trading partner and world prices and what is the dynamic response of Macedonian GDP to a such shocks. To examine this, we are estimating three variable recursive SVAR models. The results from the basic estimated model, as well as the models in the sensitivity analysis, show that only small portion of domestic GDP variation can be explained by foreign demand, whereas the prices have limited contribution. Impulse response also confirms these findings, as domestic GDP has statistically significant response to foreign demand shock, while world prices shock has no significant effect.

Suggested Citation

  • Danica Unevska Andonova & Marija Petkovska, 2011. "The transmission of external shocks to the Macedonian economic activity," Working Papers 2011-03, National Bank of the Republic of Macedonia.
  • Handle: RePEc:mae:wpaper:2011-03
    as

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    File URL: http://www.nbrm.mk/WBStorage/Files/WebBuilder_TransmissionofexternalshockstotheMacedonianeconomicactivity.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
    1. Jesús Crespo Cuaresma & Markus Eller & Aaron Mehrotra, 2011. "The Economic Transmission of Fiscal Policy Shocks from Western to Eastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 44-68.
    2. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
    3. Danica Unevska Andonova & Branimir Jovanovic, 2011. "Sustainability of the Macedonian Current Account," Working Papers 2011-06, National Bank of the Republic of Macedonia.
    4. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 91, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    VAR; international shock transmission; economic activity; Macedonia;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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