Economic Fluctuations and Macroeconomic Policies

The recent economic crisis re-emphasizes the importance of the economic fluctuations. This study investigates the role of shadow economy in combination with economic factors on the economic instability for 133 economies between 1991 and 2015. Using the system-GMM estimations, this paper shows that a larger shadow economy increases the fluctuations of GDP growth rate in relation to the size and the volatility of shadow economy. Notably, the shadow economy presents an inverted-U relationship with economic instability and this relationship is strongest for low- and lower-middle income economies. Our results identify two categories of drivers for economic fluctuations: the stabilizing factors (the labor force and the TFP) and the enhancing factors (capital investment, consumption, government spending, trade, and FDI inflows). Interestingly, exports increase economic fluctuations while imports decrease them. Finally, we discuss the differences in the determinants of economic instability across low, middle and high incomes countries. This study documented that shadow economy influences the economic fluctuations — our results actually confirm our hypothesis and the impact of shadow economy on the effectiveness of macroeconomic policies. The contribution of this paper is to show the extent to which the impact can affect the economic activities and how institutions can smooth this effect.

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Economic Fluctuations in Turkey in the Light of Business Cycle Theories

International Conference on Eurasian Economies 2012 ◽

10.36880/c03.00525 ◽

2012 ◽

Author(s):

Emine Fırat

Keyword(s):

Business Cycle ◽

Market Failure ◽

Free Market ◽

Economic Fluctuations ◽

Past Century ◽

Business Cycle Theory ◽

Macroeconomic Policies ◽

Business Cycle Model ◽

The Business Cycle ◽

The Right

Some economists have tried to demonstrate the cause of economic fluctuations and its solution with business cycle theories. The classical school emphasizes the efficiency of free market economy and the optimization of private economic factors. The Keynesian school believes that the causes of economic fluctuations arise from not only just the deviations from market equilibrium but also market failure on a grand scale. The debate over the source and propagation of economic fluctuations rages as fiercely today as it did in the Great Depression that began in 1929. Economic Fluctuation models investigate to answer the question of why economies go through boom and bust and why economies experience cycles of recession and recovery. In the economic literature, based on the Business Cycle Theories many different approaches have been proposed. While economists discuss the ultimate form of the right business cycle model, they must take into consideration the decisive factors of economic fluctuations in the past century. In this study, the local economic crisis occurred in Turkey in recent years are investigated in the light of Business Cycle Theory and also the effects of macroeconomic policies are evaluated on the basis of economic fluctuations models.

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Real Business Cycles: A New Keynesian Perspective

The Journal of Economic Perspectives ◽

10.1257/jep.3.3.79 ◽

1989 ◽

Vol 3 (3) ◽

pp. 79-90 ◽

Cited By ~ 184

Author(s):

N. Gregory Mankiw

Keyword(s):

Business Cycle ◽

Primary Source ◽

New Keynesian ◽

Economic Fluctuations ◽

Real Business Cycle ◽

Business Cycle Theory ◽

Macroeconomic Policies ◽

Real Business Cycles ◽

The Business Cycle ◽

Random Fluctuations

Real business cycle theory is the latest incarnation of the classical view of economic fluctuations. It assumes that there are large random fluctuations in the rate of technological change. In response to these fluctuations, individuals rationally alter their levels of labor supply and consumption. The business cycle is, according to this theory, the natural and efficient response of the economy to changes in the available production technology. In this essay, I appraise this newly revived approach to the business cycle. In my view, real business cycle theory does not provide an empirically plausible explanation of economic fluctuations. Both its reliance on large technological disturbances as the primary source of economic fluctuations and its reliance on the intertemporal substitution of leisure to explain changes in employment are fundamental weaknesses. Moreover, to the extent that it trivializes the social cost of observed fluctuations, real business cycle theory is potentially dangerous. The danger is that those who advise policymakers might attempt to use it to evaluate the effects of alternative macroeconomic policies or to conclude that macroeconomic policies are unnecessary.

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Impact of external currency exposures on macroeconomic policies

Voprosy Ekonomiki ◽

10.32609/0042-8736-2020-8-23-40 ◽

2020 ◽

pp. 23-40

Author(s):

I. V. Prilepskiy

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Positive Impact ◽

Exchange Rate Regime ◽

Macroeconomic Policies ◽

Panel Regressions ◽

Financial Account ◽

Currency Exposure ◽

Cross Country ◽

The Impact

Based on cross-country panel regressions, the paper analyzes the impact of external currency exposures on monetary policy, exchange rate regime and capital controls. It is determined that positive net external position (which, e.g., is the case for Russia) is associated with a higher degree of monetary policy autonomy, i.e. the national key interest rate is less responsive to Fed/ECB policy and exchange rate fluctuations. Therefore, the risks of cross-country synchronization of financial cycles are reduced, while central banks are able to place a larger emphasis on their price stability mandates. Significant positive impact of net external currency exposure on exchange rate flexibility and financial account liberalization is only found in the context of static models. This is probably due to the two-way links between incentives for external assets/liabilities accumulation and these macroeconomic policy tools.

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Eurasian Economic Union: A sober look

Voprosy Ekonomiki ◽

10.32609/0042-8736-2016-12-43-60 ◽

2016 ◽

pp. 43-60 ◽

Cited By ~ 4

Author(s):

E. Vinokurov

Keyword(s):

The State ◽

Customs Union ◽

Macroeconomic Policies ◽

Member States ◽

Goods And Services ◽

Eurasian Economic Union ◽

Ongoing Work ◽

General Rules ◽

Economic Union ◽

Trade And Investment

The paper appraises current progress in establishing the Customs Union and the Eurasian Economic Union (EAEU). Although the progress has slowed down after the initial rapid advancement, the Union is better viewed not as an exception from the general rules of regional economic integration but rather as one of the functioning customs unions with its successes and stumbling blocs. The paper reviews the state of Eurasian institutions, the establishment of the single market of goods and services, the situation with mutual trade and investment flows among the member states, the ongoing work on the liquidation/unification of non-tariff barriers, the problems of the efficient coordination of macroeconomic policies, progress towards establishing an EAEU network of free trade areas with partners around the world, the state of the common labor market, and the dynamics of public opinion on Eurasian integration in the five member states.

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Economic Fluctuations in a Planned Underdeveloped Economy -- A Case Study of Mainland China, 1952-65

Asian Survey ◽

10.1525/as.1972.12.4.01p0216l ◽

1972 ◽

Vol 12 (4) ◽

pp. 349-362

Author(s):

Kuan-I Chen

Keyword(s):

Mainland China ◽

Economic Fluctuations

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IMF Stabilization Programs, Policy Conduct and Macroeconomic Outcomes: A Case Study of Pakistan

THE LAHORE JOURNAL OF ECONOMICS ◽

10.35536/lje.2006.v11.i1.a3 ◽

2006 ◽

Vol 11 (1) ◽

pp. 35-62

Author(s):

Nawaz A. Hakro ◽

Wadho Waqar Ahmed

Keyword(s):

Current Account ◽

Inflation Rate ◽

Current Account Balance ◽

Macroeconomic Policies ◽

Explanatory Variables ◽

Fiscal Balance ◽

Macroeconomic Impacts ◽

The Individual ◽

The Imf

This study is designed to assess the macroeconomic performance of fund-supported programs, and the sequencing and ordering of macroeconomic policies in the context of the Pakistan economy. The generalized evaluation estimator technique has been used to assess the macroeconomic impacts of the IMF supported programs. GDP growth, inflation rate, current account balance, fiscal balance and unemployment are used as the target variables in order to gauge economic performance during the program years. The vector of policy variables (that might have been adopted in the absence of programs) and the vector of foreign exogenous variables are also taken as explanatory variables in the model, so that the individual effect of the IMF supported programs could be assessed. The result suggests that as the IMF prescriptions were applied, the current account balance has worsened, the unemployment rate has significantly increased, and the inflation rate has increased during the years of fund-supported programs. Only the budget balance has shown signs of improvement. Furthermore an inadequate sequencing of reforms has contributed to the further worsening of the economic scenario during the program period.

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