Sources of Fluctuations: The Case of MENA

30 Pages Posted: 5 Oct 2005

See all articles by Hideaki Hirata

Hideaki Hirata

Hosei University; Japan Center for Economic Research

M. Ayhan Kose

World Bank; Brookings Institution; Centre for Economic Policy Research (CEPR); Australian National University (ANU)

Sunghyun Henry Kim

Sungkyunkwan University - Department of Economics

Date Written: September 2005

Abstract

We analyze the sources of macroeconomic fluctuations in the emerging countries in the Middle East and North Africa (MENA) region using a dynamic stochastic general equilibrium model. The model economy captures some important structural characteristics of the MENA countries and is able to replicate the main properties of their business cycles. The results suggest that a substantial fraction of cyclical fluctuations in the MENA countries is explained by terms of trade shocks. In particular, these shocks account for more than 60 percent of the variation in aggregate output. They also explain the bulk of cyclical fluctuations in aggregate consumption. Domestic productivity shocks explain close to 40 percent of business cycle variation in aggregate output. While government spending shocks and world interest shocks are also important in accounting for the volatility of business cycles in certain macroeconomic variables, their overall impact on the dynamics of aggregate output appears to be relatively small.

Keywords: MENA, business cycles, macroeconomic fluctuations, globalization, emerging markets

JEL Classification: E32, F22

Suggested Citation

Hirata, Hideaki and Kose, M. Ayhan and Kim, Sunghyun Henry, Sources of Fluctuations: The Case of MENA (September 2005). Available at SSRN: https://ssrn.com/abstract=812386 or http://dx.doi.org/10.2139/ssrn.812386

Hideaki Hirata (Contact Author)

Hosei University ( email )

2-17-1 Fujimi
Chiyoda, Tokyo 112-6601
Japan

Japan Center for Economic Research ( email )

2-6-1, Nihonbashi Kayabacho
Chuo-ku, Tokyo 103-0025
Japan

M. Ayhan Kose

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Brookings Institution

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Australian National University (ANU)

Canberra, Australian Capital Territory 2601
Australia

Sunghyun Henry Kim

Sungkyunkwan University - Department of Economics ( email )

110-745 Seoul
Korea

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