DYNAMIC IMPACT OF EXTERNAL SHOCKS ON MACROECONOMIC FUNDAMENTALS OF SELECTED SOUTH ASIAN COUNTRIES

Jamshaid Rehman, Sehrish Fareen, Shabbir Ahmad and Aftab Anwar
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Sehrish Fareen: Research Scholar, Department of Economics, GC University Lahore
Shabbir Ahmad: Assistant Professor, Department of Economics, Division of Management & Administrative Science, University of Education Lahore
Aftab Anwar: Assistant Professor, Department of Economics, Division of Management & Administrative Science, University of Education Lahore, Pakistan

Bulletin of Business and Economics (BBE), 2022, vol. 11, issue 1, 197-207

Abstract: This research investigates the relative importance of a set of exogenous shocks in deriving the fluctuations in macroeconomic fundamentals of selected South Asian countries. We have employed the panel structural VAR model to cater to the idiosyncratic and contagion impact of shocks, for 1999Q1-2018Q2, relying on a set of exogenous shocks (Oil Price shock, Trade shock, MSCI world shock, and structural shock (GFC). The variance decomposition forecasting error and impulse response function confirm pronounce impact of external shocks on macroeconomic fundamentals, particularly in the pre-global financial crises GFC period. Moreover, the oil price shock and trade shock have a significant effect on macroeconomic fundamentals for South Asian countries with more asymmetric response vis-Ã -vis to financial shocks. Variance decompositions and impulse-response functions display that South Asian countries appear more sensitive to the trade channel rather than to the financial channel.

Keywords: External shock; real output; prices; interest rates; exchange rates; PSVAR model (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:11:y:2022:i:1:p:197-207

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