Macroeconomic Shocks: Short-Run versus Long-Run Perspectives

Malik, M. Fahad and Awan, Dr Masood Sarwar and Malik, Dr Waseem Shahid (2020): Macroeconomic Shocks: Short-Run versus Long-Run Perspectives.

Abstract

Shocks that stem from goods and money markets are supposed to be influential as it takes some time for economic agents to realize their true impacts. Therefore, these shocks can induce uncertainty about key macroeconomic variables such as CPI inflation and real GDP growth. Impacts of nominal and real shocks are computed, evaluated and compared under short-run as well as under long-run restrictions for CPI inflation and real GDP. Furthermore, different countries with varying resource structures are incorporated to achieve a comprehensive and generalized analysis. Structural VAR models are employed in order to functionalize short-run and long-run restrictions. Impulse response analysis is done to analyze effects of nominal and real shocks on CPI inflation and real GDP in short-run as well as in long-run. Variance decompositions are done to locate main sources of uncertainties in CPI inflation and real GDP. Shocks from product market appeared to be more pervasive in comparison to shocks from money market.

• Item Type: MPRA Paper
• Language: English
• Keywords: CPI inflation, real GDP, aggregate demand shock, aggregate supply shock, money demand shock, money supply shock
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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