External Shocks and Their Transmission Channels in Nigeria: A Dynamic Stochastic General Equilibrium Approach

2022 ◽  
pp. 097491012110673
Author(s):  
Titus Ayobami Ojeyinka ◽  
Dauda Olalekan Yinusa
Keyword(s):  
General Equilibrium ◽  
Open Economy ◽  
Dynamic Stochastic General Equilibrium ◽  
Policy Implications ◽  
Output Gap ◽  
External Shocks ◽  
Transmission Channels ◽  
Dynamic Stochastic ◽  
Trade And Exchange ◽  
The Impact

The study examines the sources of external shocks and investigates their transmission channels in Nigeria using the trade-weighted variables from the country’s five top trading partners. Based on the assumption of the small open economy model, the study adopts the New Keynesian Dynamic Stochastic General Equilibrium Model on quarterly data between 1981 and 2018 using the Bayesian estimation technique. Findings from the study reveal that external shocks have a temporary and short-lived effect on the Nigerian economy. In addition, the article shows that oil price, foreign output, and foreign inflation shock have positive impacts on output gap and inflation, while the impact of foreign interest rate shock on the output gap and inflation is negative and not significant. The study also reveals that external shocks collectively explain 86% and 39%of total fluctuations in the output gap and inflation, respectively. Lastly, the study finds that external shocks transmit to the Nigerian economy via different channels. The study, therefore, concludes that terms of trade and exchange rate channels are the dominant transmitters of external shocks in Nigeria. Based on the findings from the study, important policy implications are highlighted.

scholarly journals Modelling the impact of external shocks on economy of Ukraine: DSGE approach

Ekonomika ◽  
2016 ◽  
Vol 95 (1) ◽  
pp. 64-83
Author(s):  
Olena Bazhenova ◽  
Yuliya Bazhenova
Keyword(s):  
General Equilibrium ◽  
Equilibrium Model ◽  
Adjustment Costs ◽  
Dynamic Stochastic General Equilibrium ◽  
General Equilibrium Model ◽  
External Shocks ◽  
The World ◽  
Dynamic Stochastic ◽  
Positive Shock ◽  
The Impact

The paper explores the dynamic stochastic general equilibrium model to study the impact of external shocks on the economy of Ukraine. The dynamic stochastic general equilibrium model is constructed for a small open economy that includes households, firms (domestic manufacturers and importers), government, the National Bank and external sector. The model assumes the new-Keynesian approach that includes the so-called “rigidities” of prices and wages, the existence of the households’ consumption habits and investments with adjustment costs. Also, it takes into account the country’s significant dependence on mineral products imports. All goods in the economy are divided into the domestic ones (that are exported and consumed in the country), imports and mineral products. So the purpose of the model is to study the impact of external shocks on the economy of Ukraine, such as a positive shock in world output, a positive shock in the world aggregate demand, a positive shock in the world interest rate, and a positive shock in world prices.

Monetary Policy in Low-Income Countries in the Face of the Global Crisis

2018 ◽  
Author(s):  
Alfredo Baldini ◽  
Jaromir Benes ◽  
Andrew Berg ◽  
Mai C. Dao ◽  
Rafael Portillo
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Low Income ◽  
Dynamic Stochastic General Equilibrium ◽  
Policy Implications ◽  
Low Income Countries ◽  
Policy Response ◽  
Risk Appetite ◽  
Dynamic Stochastic ◽  
The Impact

The authors develop a dynamic stochastic general equilibrium (DSGE) model with a banking sector to analyse the impact of the financial crisis in developing countries and the role of the monetary policy response, with an application to Zambia. The crisis is interpreted as a combination of three related shocks: a worsening in the terms of the trade, an increase in the country’s risk premium, and a decrease in the risk appetite of local banks. Model simulations broadly match the path of the economy during this period. The model-based analysis reveals that the initial policy response contributed to the domestic impact of the crisis by further tightening financial conditions. The authors derive policy implications for central banks, and for dynamic stochastic general equilibrium modelling of monetary policy, in low-income countries.

scholarly journals Output gap in the Czech economy: DSGE approach

2019 ◽  
Vol 19 (2) ◽  
pp. 137-156
Author(s):  
Jakub Bechný
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
World Economy ◽  
Price Level ◽  
Dynamic Stochastic General Equilibrium ◽  
Domestic Demand ◽  
Output Gap ◽  
Dynamic Stochastic ◽  
The Business Cycle

Abstract This paper presents three measures of the output gap estimated by a dynamic stochastic general equilibrium model of the Czech economy. We argue that the most plausible description of the business cycle provides the output gap defined as a deviation from a flexible price level of output, which is generated solely by permanent growth shocks. Our model shows that 2006-2008 overheating of the economy and the following 2008-2009 slump can be largely attributed to development in a world economy and export and import sectors, while the 2012-2013 recession was caused mainly by a combination of adverse domestic demand and cost shocks.

LABOR MARKET VOLATILITY, SKILLS, AND FINANCIAL GLOBALIZATION

2013 ◽  
Vol 18 (5) ◽  
pp. 1018-1047 ◽  
Author(s):  
Claudia M. Buch ◽  
Christian Pierdzioch
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Dynamic Stochastic General Equilibrium ◽  
Financial Globalization ◽  
Skilled Workers ◽  
Hours Worked ◽  
Skill Levels ◽  
Level Data ◽  
Dynamic Stochastic ◽  
The Impact

We analyze the impact of financial globalization on volatilities of hours worked and wages of high-skilled and low-skilled workers. Using cross-country, industry-level data for the years 1970–2004, we establish stylized facts that document how volatilities of hours worked and wages of workers with different skill levels have changed over time. We then document that the volatility of hours worked by low-skilled workers has increased the most in response to the increase in financial globalization. We develop a dynamic stochastic general equilibrium model of a small open economy that is consistent with the empirical results. The model predicts that greater financial globalization increases the volatility of hours worked, and this effect is strongest for low-skilled workers.

Monetary Policy Shocks and Effectiveness of Channels of Transmission in Nigeria: A Dynamic Stochastic General Equilibrium Approach

2019 ◽  
Vol 20 (2) ◽  
pp. 331-353 ◽  
Author(s):  
Akinlo Anthony Enisan ◽  
Apanisile Olumuyiwa Tolulope
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Dynamic Stochastic General Equilibrium ◽  
Monetary Policy Transmission ◽  
Monetary Policy Shocks ◽  
Transmission Channels ◽  
Policy Transmission ◽  
Policy Shocks ◽  
Dynamic Stochastic ◽  
Monetary Policy Shock

This study examines the effect of anticipated and unanticipated monetary policy shocks on the effectiveness of monetary policy transmission mechanism in Nigeria by estimating a sticky-price dynamic stochastic general equilibrium (DSGE) model using Bayesian estimation approach. Four major transmission channels (exchange rate, interest rate, credit and expectation) are considered due to the economic and financial conditions of Nigeria. The study employs quarterly data from 1986:1 to 2013:4 and data are sourced from World Development Indicator (online version). Results show that unanticipated monetary policy shock has short-run impact on monetary policy transmission channels, while anticipated monetary policy shock has long-run impact on the monetary policy transmission channels. The study, therefore, concluded that efforts should be directed at reducing the unanticipated monetary policy by announcing government policy at the beginning of the year so as to reduce people’s expectation.

scholarly journals Modeling Trade Tensions

2020 ◽  
Vol 20 (279) ◽  
Author(s):  
Benjamin Hunt ◽  
Susanna Mursula ◽  
Rafael Portillo ◽  
Marika Santoro
Keyword(s):  
General Equilibrium ◽  
Large Scale ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Aggregate Productivity ◽  
Computational General Equilibrium ◽  
Aggregate Production Function ◽  
Dynamic Stochastic ◽  
The Impact ◽  
Reallocation Of Resources

In this paper, we investigate the mechanisms through which import tariffs impact the macroeconomy in two large scale workhorse models used for quantitative policy analysis: a computational general equilibrium (CGE) model (Purdue University GTAP model) and a multi-country dynamic stochastic general equilibrium (DSGE) model (IMF GIMF model). The quantitative effects of an increase in tariffs reflect different mechanisms at work. Like other models in the trade literature, in GTAP higher tariffs generate a loss in terms of output arising from an inefficient reallocation of resources between sectors. In GIMF instead, as in other DSGE models, tariffs act as a disincentive to factor utilization. We show that the two models/channels can be broadly interpreted as capturing the impact of tariffs on different components of a country’s aggregate production function: aggregate productivity (GTAP) and factor supply/utilization (GIMF). We discuss ways to combine the estimates from these two models to provide a more complete assessment of the macro effects of tariffs.

scholarly journals Financial Crises, Regulation and Growth

2008 ◽  
Vol 206 ◽  
pp. 56-65 ◽  
Author(s):  
Ray Barrell ◽  
Ian Hurst ◽  
Simon Kirby
Keyword(s):  
General Equilibrium ◽  
Financial Crises ◽  
Credit Rationing ◽  
Equity Market ◽  
Dynamic Stochastic General Equilibrium ◽  
Significant Rise ◽  
Global Model ◽  
Dynamic Stochastic ◽  
Market Valuations ◽  
The Impact

The paper discusses the effects on growth of a systemic banking crisis as a result of debt defaults. These effects will come from the impact of credit rationing on consumption and credit and from the impacts of a significant rise in the spread between lending and borrowing rates for both producers and consumers. The analysis uses the dynamic stochastic general equilibrium version of the National Institute global model. The paper also investigates the impact on output of a permanent, regulation induced, rise in margins in the financial sector, taking into account the impacts of regulation on equity market valuations.

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