Vol 8, No 1 (2020)
Does the DSGE Model Fit the Sudan Economic Data?
Khalafalla Ahmed Mohamed Arabi
Abstract
This paper examines the possibility for Sudan to build a small open-economy, dynamic stochastic general equilibrium (DSGE) model. The model consists of 14 equations estimated by the Bayesian technique using the data from five variables for the period 1960-2017, which are the real money supply, the inflation rate, the output gap, the real exchange rate and the interest rate. Results indicate that the Sudan's central bank (CBS) is practicing less radical change in the formulating monetary policy, and is achieving slight progress in combating inflation and fostering economic growth. The nominal interest rate and the general price level have the same effect on the terms of monetary policy. The relationship between inflation and real marginal cost is weak. However, the position of interest rate in monetary policy is weak compared with the exchange rate. Finally, a one-point reduction in nominal interest reduces the output gap by 3%. The shock of inflation has the greatest effect on the endogenous variables, followed by shock to the consumer preference, real money supply, and finally shock to the general level of prices.
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Keywords
Economic growth; Inflation; Monetary policy; Output gap.
Publication information
Volume 8, Issue 1
Year of Publication: 2020
ISSN: 1857 - 8721
Publisher: EDNOTERA
How to cite
Arabi K. A. M.: Does the DSGE Model Fit the Sudan Economic Data?. Journal of Applied Economics and Business, Vol 8, No. 1, 5-17. (2020)