We analyze, in this paper, the optimality of pro-cyclical monetary policy in the presence of informal sector. Our findings suggest that monetary tightening only in case of severe shock with high leverage ratio and that conventional monetary policy favors both the formal and informal sectors...

In this paper we use the Bayesian methodology to estimate the structural and shocks‟ parameters of the DSGE model in Ahmad et al. (2012). This model includes formal and informal firms both at intermediate and final goods production levels. Households derive utility from leisure, real money...

In this paper we develop a closed economy DSGE model of Pakistan with informality both in the labor and product markets. We try to remain consistent with the micro-foundations of Pakistan’s economy for the purpose of estimation of the model parameters. However a couple of them have been...

Recent research work has shown that inflation rate is asymmetric and it is also well known that asymmetry is a non-linear phenomenon. In order to better understand this non-linearity in inflation of Pakistan, we investigate the possible presence of Smooth Transition Autoregressive (STAR)...

Weak governance adversely affects firm’s net worth and consequently the value of its collateral. This negative impact on the collateral reduces the external credit available for importing inputs constraining potential output. As a result, a stronger procyclical monetary policy stance is...

In this paper, we accomplish two tasks. First, we estimate the output gap for the United Arab Emirates using the production function approach. Secondly, we evaluate to what extent the fluctuations of the output gap are an important indicator of domestic inflation. We find that the output gap...

Using data from 87 countries, we show that proximity of recipient countries to the economic centres of the world, a diversified source of international tourist supplies, and larger share of GDP as tourism revenues are conducive to lower volatility in tourism receipts. We also find that the...

This paper investigates welfare gains and channels of risk sharing among 14 Middle Eastern and North African (MENA) countries, including the oil-rich Gulf region and the resource-scarce economies such as Egypt, Morocco and Tunisia. The results show that, for the 1992--2009 period, the overall...

We examine the impact of the global financial crisis on the degree of international income and consumption risk-sharing among industrial economies using returns on cross-border portfolio holdings (e.g., debt, equity, fdi). We split the returns from the net foreign holdings as receipts (inflows)...

This paper assesses the costs of forming a monetary union among the Gulf Cooperation Council (GCC) countries by looking at economic linkages within the GCC, and between the GCC and the potential anchors (the US, and major European countries such as France, Germany and Italy) for their proposed...