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ECONOMIC MANAGEMENT MODELING IN THE ECO REGION

ECONOMIC MANAGEMENT MODELING IN THE ECO REGION. Research Proposal PIDE and Iran . Introduction. Prudent economic management is essential for putting the economies on the path of sustainable economic growth.

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ECONOMIC MANAGEMENT MODELING IN THE ECO REGION

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  1. ECONOMIC MANAGEMENT MODELING IN THE ECO REGION Research Proposal PIDE and Iran

  2. Introduction • Prudent economic management is essential for putting the economies on the path of sustainable economic growth. • Over the years, the economies of the ECO region have sought to improve macroeconomic policies as reflected in trade liberalization efforts, more flexible exchange rate regimes, and lower fiscal deficits, which have combined to reduce uncertainty and improve the overall investment environment.

  3. Cont’d… • The ECO countries are also pursuing privatization and structural reforms • ECO’s commonalities indicate a big potential for cooperation in these resource-rich economies • In this era of globalization, economic opportunities arising from the global market can be better harnessed through efficient economic management

  4. Cont’d… • Economic management leads to development in region which is essential for standard of living. • Efficient economic management strategy must based on local conditions and circumstances and priorities should be set with longer-term perspective. • ECO countries must continue with their agenda of reforms and institutional innovation in banking, capital markets, tax system, and corporate sectors

  5. Cont’d… • Macroeconomic stability and economic growth could help reduce poverty in conjunction with investment in social sectors • Structural reforms are needed to strengthen policies and to remove microeconomic distortions • Improved governance affects the quality of growth by allowing realization of higher returns on investment and is also conducive to poverty reduction

  6. Cont’d • To deal with domestic macroeconomic imbalances, the member states need strong commitment to sound fiscal and monetary policies. • Prudent macroeconomic management of the economies based on a rigorous and internally consistent macroeconomic model may help the process of macro policy formulation in the ECO member countries. • The foremost goal remains improvement in the quality of life of people through stable and sustained economic growth, which in turn depends on sound macroeconomic policies.

  7. Objective of the Study • To develop a macro-econometric model for the ECO member countries that can provide rigorous analytical platform for assessing the impact of macroeconomic policies in the economy

  8. Justification of the Study • Economic management is an important component of a nation’s strategies for economic development and subsequently a better standard of living • In this era of globalization, economic opportunities arising from the global market can better be harnessed through efficient economic management • Economic management modeling provides tools and procedures through which this objective could be realized.

  9. Theoreticalframework • Develop a dynamic macroeconomic model to study the role of macroeconomic policies and identify the dynamic adjustment process in the key economic variables. • Specifically study would focus on macro-econometric models because they depict the structure as well as temporal behavior of the macro-economy and provide implications of a exogenous and policy shocks.

  10. Cont’d… • proposed models would be based on an open economy framework and would take into account the features of the ECO economies. • key components (i) production, (ii) aggregate demand and expenditures, (iii) fiscal block, (iv) foreign trade block, and (v) monetary and price.

  11. Preliminary Model Specification: The Production Block

  12. Production Block (cont.)

  13. Aggregate Demand

  14. Private Consumption and Disposable Income

  15. Data and Estimation Methodology • Time series data for the macroeconomic aggregates • Cointegration approach (Engle-Granger two-step procedure) to estimate the model. • mean absolute percentage error (MAPE) and Theil’s inequality coefficient (U) • a range of simulations of macroeconomic policy model to assess issues such as the domestic and international consequences of policies

  16. Expected Results • workable set of macro-econometric models that can help the process of macroeconomic management in the ECO member countries.

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