The main objective of this paper is to quantify the importance of external shocks in domestic and external variables fluctuations for a sample of three North African countries (Algeria, Morocco, and Tunisia) using a VAR model estimation... more
The main objective of this paper is to quantify the importance of external shocks in domestic and external variables fluctuations for a sample of three North African countries (Algeria, Morocco, and Tunisia) using a VAR model estimation with quarterly data during the period 1990-2010. Since the early 1990s, Maghreb countries have implemented these last year, structural liberalization policies and modernized banking and financial regulations in order to strengthen their financial systems, establish an economic union between them and improve their economic growth rates. Accompanying to these developments, the study of this relationship has been largely analyzed in the literature. In fact, several theoretical and empirical studies have been elaborated to understand the process of international banking and financial shocks and their impact on economic development of countries as well as on the ability to create economic integration between them. Results find that external shocks negativ...
This paper uses a global vector autoregressive (GVAR) model to analyze the relationship between FDI inflows and output dynamics in a multi-country context. The GVAR model enables us to make two important contributions: First, to model... more
This paper uses a global vector autoregressive (GVAR) model to analyze the relationship between FDI inflows and output dynamics in a multi-country context. The GVAR model enables us to make two important contributions: First, to model international linkages among a large number of countries, which is a key asset given the diversity of countries involved, and second, to model foreign direct investment and output dynamics jointly. The country-specific small-dimensional vector autoregressive submodels are estimated utilizing a Bayesian version of the model coupled with stochastic search variable selection priors to account for model uncertainty. Using a sample of 15 emerging and advanced economies over the period 1998:Q1 to 2012:Q4, we find that US outbound FDI exerts a positive long-term effect on output. Asian and Latin American economies tend to react faster and also stronger than Western European countries. Forecast error variance decompositions indicate that FDI plays a prominent role in explaining GDP fluctuations, especially in emerging market economies. Our findings provide evidence for policy makers to design macroeconomic policies to attract FDI inflows in the respective countries.. We are indebted to Benedikt Sargant for excellent research support.
Las reformas promercado implementadas en la década de 1990 redujeron notablemente el espacio de negocios en la Argentina. Sumado al carácter cíclico de la economía nacional basado en la restricción externa, la inestabilidad macroeconómica... more
Las reformas promercado implementadas en la década de 1990 redujeron notablemente el espacio de negocios en la Argentina. Sumado al carácter cíclico de la economía nacional basado en la restricción externa, la inestabilidad macroeconómica condujo a una tendencia a la dolarización y formación de activos externos como factores estructurales de la economía doméstica.
The problem with the most of the developing economies is that their monetary policy is constrained by external shocks and developed economies central banks especially FED and ECB. In this research, we examine the effects of major external... more
The problem with the most of the developing economies is that their monetary policy is constrained by external shocks and developed economies central banks especially FED and ECB. In this research, we examine the effects of major external shocks like global oil price shocks, foreign interest rate shocks and global food price shocks on the major macro variables of Pakistan which creating hurdles for the SBP to achieve its monetary policy objectives independently. The results stating that the global oil price and global food price shocks have direct impacts on the major macro variables of Pakistan and put inflationary pressure on the Pakistan economy which making difficult for the central bank to achieve its predetermined dual objective of monetary policy i.e. full employment and stable inflation. Additionally, we examine how the changes in US monetary policy effects Pakistan economy and find that positive foreign interest rate shock has minor impacts on the major macro variables of Pakistan except for the exchange rate and domestic inflation rates which is also imposing an external constraint on the monetary policymaking process of Pakistan central bank. In a nutshell, all these external shocks are creating hurdles and imposing monetary constraints on the Pakistan which making difficulties for Pakistani central bank to achieve its monetary policy objectives.
Central America and the Dominican Republic are enjoying a favorable external environment. The U.S. economic recovery, the main trade partner of the region, and the marked fall in oil prices has made it possible to keep up flows of... more
Central America and the Dominican Republic are enjoying a favorable external environment. The U.S. economic recovery, the main trade partner of the region, and the marked fall in oil prices has made it possible to keep up flows of remittances and investment, improve the terms of trade, and to contribute to the strengthening of the external position of the region and its economic growth. However, the relative quality of the regional export basket has receded and few advances have been made in its modernization, which has limited the gains. In this environment, risks remain. Economic deceleration in China or upward adjustment of the U.S. interest rate could negatively impact the balance of payments of the countries. Meanwhile, in the framework of the Free Trade Agreement between the Dominican Republic, Central America and the United States, some agricultural products protected until 2015 will begin to enter markets free of tariffs, which could unveil the fragility of regional competitiveness. The above urges both to prioritize structural reforms to exploit trade complementarities and to coordinate policies with the private sector. The promotion scheme for local industry and direct investment should be reviewed, avoiding the use of tax breaks to compensate for competitive weaknesses. It is pertinent to develop the non-traditional export basket with the aim of drawing more benefit from U.S. growth, diversifying trade risk and generating local horizontal spillovers. Facing threats of less favorable conditions, external scenarios testing the regional performance are explored. Each country should decide between being bystanders of external swings or protagonists of policies which lead to lasting national benefits.
