Sources of output volatility in mena countries

Abstract

This paper attempts an assessment of the relative importance of various shocks in accounting for output fluctuations in MENA countries. We decomposed macroeconomic shocks into country-specific, regional, and global sources, and using a small open economy SVAR model, we identify the relative importance of each shock in explaining output volatility in the 15 MENA countries. Our result show that country-specific factors account for most of the output volatility in the region. For less than half of the countries in the region, global shocks play a significant role in explaining output volatility. Contrary to some findings in the empirical literature, especially on Sub-Saharan Africa, the regional factor does not seem to have a statistically significant impact in any of the countries under consideration. The results are uniform and no statistically significant difference is observed for the countries in the MENA region. Furthermore, oil-exporting and oil-poor countries in the sample do not show any noticeable difference.