Shock Reactions in MAKRO

27-01-2025

This paper analyzes the dynamic responses of the MAKRO model to various economic shocks by exploring key transmission mechanisms across demand, supply, foreign price, financial, and public sector channels. It provides insights into how these shocks propagate through the economy, affecting key macroeconomic variables.

Abstract

This paper presents an analysis of economic shock reactions within the MAKRO model. The study evaluates the model’s response to a series of permanent, unfinanced shocks, including demand, supply, foreign price, financial, and miscellaneous shocks. Each shock type is examined in terms of its fundamental transmission mechanisms, such as sectoral production adjustments, labor and capital market dynamics, and public sector responses. The results highlight the model’s sensitivity to various economic disturbances, demonstrating the propagation effects on key macroeconomic indicators, including GDP, employment, and fiscal sustainability. The findings contribute to a deeper understanding of economic resilience and policy implications in the context of counterfactual analysis using the MAKRO model.