Applied Economic Modeling And Forecasting (Fiscal Policy Analysis And Planning)
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Browsing Applied Economic Modeling And Forecasting (Fiscal Policy Analysis And Planning) by Subject "Financial Policy Analysis and Planning"
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Item Modeling and Forecasting Currency in Circulation in Ethiopia(Addis Ababa University, 2014-06) Semate, Getahun; Ferede, Tadele (PhD)In the literature, Currency in circulation is typically estimated either by specifying a currency demand equation based on the theory of transaction and portfolio demand for money or univariate time series models. The first approach works well with low frequency data but faces limitations with high frequency data series. Using monthly and weekly data of currency in circulation form May 2007 to April 2014, the paper proposes an alternative approach in modeling the high frequency data series by using Multivariate time series (structural model and VAR) univariate time series(trend and ARIMA) Model. The four separate models were estimated with monthly, and two separate models with weekly time series, assembling tools for forecasting trend, seasonal patterns and cycles in individual series separately. Trend and seasonal effects were identified by regressing on trend and seasonal dummies while cyclical dynamics were captured by allowing for ARMA effect in the regression disturbances. The monthly and weekly models clearly identify both intra –month and inter-month variation of currency in circulation. The monthly trend model also indentified that Ethiopian New Year has significant positive impact on demand for currency in Ethiopia. Finally model comparison result showed both monthly VAR, and trend models outperforms the structural and ARIMA models and trend model performs the weekly data wheel at 5% level of significance. In general this methodology may be used in forecasting currency in circulation with careful assessment of month to month and week to week current developments in the economy.Item Monetary Policy and Exchange Rate Shock on Ethiopian Trade Balance: Using SVAR Approach(Addis Ababa University, 2014-06) Abinet, Chalachew; Hasan, Syed (PhD)This paper investigates monetary and exchange rate policy shock on Ethiopian trade balance. Trade balance is the most important macroeconomic variable in every country due to its importance for economic growth and it is affected by monetary and exchange rate policy. To accomplish this study the researcher used Structural Vector Autoregressive model. The time series data included for the study was quarterly data starting from quarter on 1997/98 to quarter four 2012/13. The variables included under study was trade balance which is expressed as a ratio of export to import, consumption gap(foreign- domestic), consumer price index gap(foreign- domestic), reserve money and real effective exchange rate. Stationarity of time series data was tested using ADF test. To select the best lag length information criteria BIC and AIC and others were used lag two was selected as the best lag length. Johansen cointegration test was used to test the existence of long run relationship among variables. SVAR restriction approach based on theory was applied to analyze these variables. The impulse response result shows that exchange rate appreciation improves the trade balance in the short run and deteriorates in the long run which supports the J curve effect. But expansionary monetary policy does not support the existence of J curve effect rather it has cyclical pattern and it affects the trade balance through expenditure switching effect. The expansionary monetary policy dominates the exchange rate effect on explaining the Ethiopian trade balance fluctuation