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The RBC View of Pakistan: A Declaration of Stylized Facts and Essential Models

Author

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  • M. Ali Choudhary

    (University of Surrey and State Bank of Pakistan)

  • Farooq Pasha

    (State Bank of Pakistan)

Abstract

In this paper, we establish the nature of short-run fluctuations of the Pakistani economy over the period of 1981-2010. There have been significant changes in the nature of the Pakistani economy over the last few decades. Therefore, we focus our detailed analysis on the last few decades where it seems more appropriate to investigate the nature and causes of business cycles in Pakistan. Furthermore, we evaluate the performance of a typical RBC and an augmented RBC model with an exogenous FDI shock in explaining cyclical fluctuations experienced by the Pakistani economy. We find that a simple RBC model performs poorly in terms of matching relevant second- order moments of short run fluctuations as depicted by the data. However, augmented RBC model performs better compared to the simple RBC model.

Suggested Citation

  • M. Ali Choudhary & Farooq Pasha, 2013. "The RBC View of Pakistan: A Declaration of Stylized Facts and Essential Models," School of Economics Discussion Papers 0413, School of Economics, University of Surrey.
  • Handle: RePEc:sur:surrec:0413
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    File URL: https://repec.som.surrey.ac.uk/2013/DP04-13.pdf
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    References listed on IDEAS

    as
    1. Diego Comin & Norman Loayza & Farooq Pasha & Luis Serven, 2014. "Medium Term Business Cycles in Developing Countries," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 209-245, October.
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    11. M. Ali Choudhary & Saima Mahmood & Sajawal Khan & Waqas Ahmed & Gylfi Zoega, 2013. "Sticky Wages in a Developing Country: Lessons from Structured Interviews in Pakistan," School of Economics Discussion Papers 0213, School of Economics, University of Surrey.
    12. Fagan, Gabriel & Messina, Julián, 2009. "Downward wage rigidity and optimal steady-state inflation," Working Paper Series 1048, European Central Bank.
    13. Ghate, Chetan & Pandey, Radhika & Patnaik, Ila, 2011. "Has India emerged? Business cycle facts from a transitioning economy," Working Papers 11/88, National Institute of Public Finance and Policy.
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    Cited by:

    1. Muhammad Nadim Hanif & Muhammad Jahanzeb Malik, 2013. "Quarterisation of National Income Accounts of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 9, pages 1-61.
    2. Ahmed, Shahzad & Pasha, Farooq, 2014. "The Role of Money in Explaining Business Cycles for a Developing Economy: The Case of Pakistan," MPRA Paper 55262, University Library of Munich, Germany, revised 11 Apr 2014.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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