Uncertainty and monetary policy during the Covid-19 pandemic in Tunisia: Evidence from a Bayesian VAR

Dorra Turki and Foued Badr Gabsi
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Dorra Turki: University of Sfax, Tunisia
Foued Badr Gabsi: University of Sfax, Tunisia

Theoretical and Applied Economics, 2023, vol. XXX, issue 1(634), Spring, 177-188

Abstract: This paper aims to examine the impact of the uncertainty shock on the Tunisian economy and the effectiveness of monetary policy during the Covid-19 pandemic. For this purpose, we employ a Bayesian VAR model considering the world uncertainty index (WUI) as a new proxy for uncertainty measure and the short-term interest rate as the main instrument of monetary policy. The results indicate that the Covid-19 uncertainty shock has a negative consequence on economic activity and on aggregate demand in Tunisia. Moreover, we show that conventional monetary policy is ineffective in times of high uncertainty period.

Keywords: Covid-19; uncertainty; monetary policy; BVAR model; impulse response. (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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