Can the Distributional Impacts of Macroeconomic Shocks be Predicted? A Comparison of the Performance of Macro-Micro Models with Historical Data for Brazil
What was the impact of Brazil's 1998-99 currency crisis-which resulted in a change of exchange rate regime and a large real devaluation-on the occupational structure of the labor force and the distribution of incomes? Would it have been possib...
| Main Authors: | , , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/05/4972852/can-distributional-impacts-macroeconomic-shocks-predicted-comparison-performance-macro-micro-models-historical-data-brazil http://hdl.handle.net/10986/14030 |
| Summary: | What was the impact of Brazil's
1998-99 currency crisis-which resulted in a change of
exchange rate regime and a large real devaluation-on the
occupational structure of the labor force and the
distribution of incomes? Would it have been possible to
predict such effects ahead of the crisis? The authors
present an integrated macro-micro model of the Brazilian
economy in 1998. The model consists of an applied general
equilibrium macroeconometric component, connected through a
set of linkage aggregate variables to a microeconomic model
of household incomes. The authors use this framework to
predict the employment and distributional consequences of
the 1999 Brazilian currency crisis, based on 1998 household
survey data. They then test the predictive performance of
the model by comparing its simulated results with the actual
household survey data observed in 1999. In addition to the
fully integrated macro-micro model, the authors also test
the performances of the microeconometric model on its own,
and of a "representative household groups"
approach. They find that the integrated macro-micro
econometric model, while still inaccurate on many
dimensions, can actually predict the broad pattern of the
incidence of changes in household incomes across the
distribution reasonably well, and much better than the
alternative approaches. The authors conclude that further
experimentation with these tools might be of considerable
potential usefulness to policymakers. |
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