A Macroeconometric Model for Saudi Arabia | springerprofessional.de

Springer Professional

Top

Open Access 2023 | Open Access | Book

A Macroeconometric Model for Saudi Arabia

A Case Study on the World’s Largest Oil Exporter

Authors: Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

Publisher: Springer International Publishing

Book Series : SpringerBriefs in Economics

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

Table of Contents

About this book

This Open Access Brief presents the KAPSARC Global Energy Macroeconometric Model (KGEMM). KGEMM is a policy analysis tool for examining the impacts of domestic policy measures and global economic and energy shocks on the Kingdom of Saudi Arabia. The model has eight blocks (real sector, fiscal, monetary, external sector, price, labor and wages, energy, population, and age cohorts) that interact with each other to represent the Kingdom’s macroeconomy and energy linkages. It captures New Keynesian demand-side features anchored to medium-run equilibrium and long-run aggregate supply. It applies a cointegration and equilibrium correction modeling (ECM) methodology to time series data to estimate the model’s behavioral equations in the framework of Autometrics, a general-to-specific econometric modeling strategy. Hence, the model combines ‘theory-driven’ approach with ‘data-driven’ approach.

The Brief begins with an introduction to the theoretical framework of the model and the KGEMM methodology and then walks the reader through the structure of the model and its behavioral equations. The book closes with simulations showing the application of the model. Providing a detailed introduction to a cutting-edge, robust predictive model, this Brief will be of great use to researchers and policymakers interested in macroeconomics, energy economics, econometrics, and more specifically, the economy of Saudi Arabia.

Advertisement

Table of Contents

Frontmatter

Open Access

Chapter 1. Executive Summary

Abstract

The objective of this book is to introduce the KAPSARC Global Energy Macroeconometric Model (KGEMM) and to conduct a detailed survey of the existing macroeconomic models for Saudi Arabia discussing their strengths and weaknesses. KGEMM is a policy analysis tool for examining the impacts of domestic policies and changes in global economy including energy markets on the Saudi Arabian economic (macro and sectoral), energy, and environmental relations.

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Open Access

Chapter 2. Literature Review

Abstract

The history of macroeconometric model-building is comprehensively documented in Fair (1984, 1994), Bodkin et al. (1991), Hendry and Mizon (2000), Favero (2001), Pagan (2003a, b), Bårdsen et al. (2004, 2005), Valadkhani (2004), Hendry and Muellbauer (2018), Jelić and Ravnik (2021) inter alia. Also, history and macroeconometric modeling activities over the world and their classification are documented in Welfe (2013).

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Open Access

Chapter 3. Theoretical Framework and Stylized Facts

Abstract

In a very broad sense, KGEMM is a demand-side macroeconometric model augmented with several supply-side representations. The fifth version of KGEMM, presented in this book, has more supply-side augmentation compared to earlier versions. Welfe (2011) among others discuss that for macroeconometric models to be used for policy analysis and projections they should represent both the demand- and supply-side relationships.

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Open Access

Chapter 4. KGEMM Methodology

Abstract

This chapter briefly describes the methodological framework KGEMM uses. KGEMM is a hybrid model, i.e., it brings together theoretical and empirical coherences at some degree. Put differently, KGEMM nests “theory-driven” and “data-driven” approaches as suggested by Hendry (2018), among others, and employed by modelers in building semi-structural macroeconometric models (e.g., see Jelić and Ravnik 2021; Gervais and Gosselin 2014; Bulligan et al. 2017). For this purpose, it uses an equilibrium correction modeling (ECM) framework, in which the long-run relationships follow economic theories, and the short-run relationships are mainly data-driven (see Pagan 2003a, b inter alia). Hara et al. (2009) and Yoshida (1990), among others, note that ECM-based MEMs provide realistic results as their equilibrium correction mechanisms help stabilize long-term projections and capture short-term fluctuations more than other models while Engle et al. (1989) find the forecast performance of ECM more accurate.

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Open Access

Chapter 5. Database

Abstract

One of the heaviest resource-consuming tasks of KGEMM, as with all MEMs, is the collection, update, revision, and maintenance of data. In econometric modeling, data are the key elements in determining the statistical properties of relationships. In this regard, data availability plays an important role in establishing linkages between the variables in time series-based MEMs. As discussed in the literature review, MEMs are heavily data-intensive, and obtaining comprehensive results is conditional upon the accuracy and time span of the data. MEMs are also data-dependent, with data updates and revisions resulting in re-estimation of the behavioral equations.

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Open Access

Chapter 6. A Brief History and Structure of KGEMM

Abstract

It is useful to provide a brief overview of the development stages of KGEMM, as these stages shaped the structure of the current version of the model. As mentioned previously, KGEMM has been developed to have a better representation of the Saudi Arabian economic (sectoral and macro) and energy relationships. The main motivation for developing it was that there was no available model (including subscription based) that properly represented the Saudi Arabian economy and could comprehensively inform the policy decision-making process.

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Open Access

Chapter 7. KGEMM Behavioral Equations and Identities

Abstract

This chapter reports the estimated long-run equations and identities in Sects. 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, and 7.9 while the estimated short-run equations, i.e., final ECM specifications associated with the long-run equations are reported in Appendix B to save space in the main text. Note that the long-run and ECM equations are estimated till 2019 in the fifth version of KGEMM. Starting years of the estimations range from the 1970s to the 1990s dictated by the data availability. For the readers ease, we describe one of the long-run equations below and the rest equations here follow the same context. As an example, we select the first appeared long-run equation, i.e., Eq. (7.43).

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Open Access

Chapter 8. KGEMM Simulations

Abstract

As mentioned earlier, MEMs are evaluated and validated using in-sample and out-of-sample simulations, and policy analysis, among other validation methods. In this section, we run KGEMM for in-sample forecasting and out-of-sample policy analysis to evaluate its predictive ability. Hasanov and Joutz (2013) provide an overview of the literature that covers in-sample and out-of-sample forecasts and other methods for evaluating the predictive ability of MEMs. This includes Calzolari and Corsi (1977), Beenstock et al. (1986), Klein et al. (1999), Fair (1984, 1994, 2004), Bardsen and Nymoen (2008).

Fakhri J. Hasanov, Frederick L. Joutz, Jeyhun I. Mikayilov, Muhammad Javid

PDF View full text

Backmatter

Title: A Macroeconometric Model for Saudi Arabia
Authors: Fakhri J. Hasanov
Frederick L. Joutz
Jeyhun I. Mikayilov
Muhammad Javid
Copyright Year: 2023
Publisher: Springer International Publishing
Electronic ISBN: 978-3-031-12275-0
Print ISBN: 978-3-031-12274-3
DOI: https://doi.org/10.1007/978-3-031-12275-0