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 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.

Bibliographic Details

Main Authors:	Leite, Phillippe George, Ferreira, Francisco H.G., Pereira da Silva, Luiz A., Picchetti, Paulo
Language:	English en_US
Published:	World Bank, Washington, D.C. 2004-05
Subjects:	ACCELERATOR, AGGREGATE DEMAND, AGGREGATE GROWTH, AGGREGATE SUPPLY, AGGREGATE SUPPLY CURVE, AVERAGE ANNUAL, AVERAGE INCOME, AVERAGE RESULTS, BALANCE OF PAYMENTS, BALANCE SHEETS, BANK DEPOSITS, BONDS, CAPITAL FLOWS, CAPITAL INFLOWS, CAPITAL OUTFLOWS, CENTRAL BANK, COMMERCIAL BANKS, CPI, CROSS-COUNTRY ANALYSIS, CROSS-SECTION DATA, CURRENCY CRISES, CURRENT ACCOUNT, DEBT, DEFLATION, DEFLATORS, DEMAND FOR MONEY, DEMAND FUNCTIONS, DEVALUATION, DEVELOPED ECONOMIES, DEVELOPING COUNTRIES, DISPOSABLE INCOME, DISTRIBUTIONAL EFFECTS, DOMESTIC INTEREST RATES, DOMESTIC PRICES, DYNAMIC STRUCTURE, ECONOMETRIC MODEL, ECONOMETRIC MODELS, ECONOMIC ACTIVITY, ECONOMIC CONDITIONS, ELASTICITIES, EMERGING MARKETS, ENDOGENOUS VARIABLES, EQUATIONS, EQUILIBRIUM, EQUILIBRIUM WAGE, EXCHANGE RATE, EXCHANGE RATE REGIME, EXCHANGE RATE REGIMES, EXPORTS, EXTERNAL SHOCKS, FACTOR DEMAND, FACTOR MARKETS, FINANCIAL ASSETS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL LIBERALIZATION, FINANCIAL MARKETS, FINANCIAL SECTOR, FISCAL POLICY, FLOATING EXCHANGE RATE, FLOATING EXCHANGE RATE REGIME, FOREIGN CURRENCY, FOREIGN EXCHANGE, GDP, GDP DEFLATOR, GENERAL EQUILIBRIUM MODEL, GNP, GROSS FIXED CAPITAL FORMATION, GROWTH RATE, GROWTH RATES, HISTORICAL DATA, HOUSEHOLD DATA, HOUSEHOLD INCOME, HOUSEHOLD INCOMES, HOUSEHOLD LEVEL, HOUSEHOLD SURVEYS, IMPORTS, INCOME, INCOME DISTRIBUTION, INCOMES, INCREASE POVERTY, INDIVIDUAL INCOMES, INEQUALITY, INFLATION, INFLATION TARGETING, INFORMAL SECTOR, INTEREST RATE, INTEREST RATES, INTERNATIONAL RESERVES, LABOR FORCE, LABOR MARKET, LABOR MARKETS, LOCAL CURRENCY, MACRO MODELS, MACRO STABILITY, MACROECONOMIC MODELS, MACROECONOMIC POLICIES, MACROECONOMIC SHOCKS, MARGINAL PRODUCT, MARGINAL PRODUCTS, MONETARY POLICY, MONETARY SHOCKS, MPS, MULTIPLIERS, NEGATIVE IMPACT, NOMINAL EXCHANGE RATE, NOMINAL RATE, POLICY CHANGES, POLICY INSTRUMENTS, POLICY PACKAGE, POLICY RESEARCH, PRIMARY SURPLUS, PRIVATE CONSUMPTION, PRIVATE INVESTMENT, PRIVATE SECTOR, PRODUCT MARKETS, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PUBLIC SECTOR, RATIONAL EXPECTATIONS, REAL APPRECIATION, REAL EXCHANGE, REAL EXCHANGE RATE, REAL GDP, REAL GROWTH, REAL INTEREST, REAL INTEREST RATES, REAL WAGES, REAL_GROWTH, RELATIVE PRICES, RISK PREMIUM, SECTORAL COMPOSITION, SERIES DATA, SKILL LEVEL, SKILL WORKERS, SKILLED WORKERS, SUPPLY CURVES, TAX REVENUES, TIME SERIES, TOTAL OUTPUT, TRANSMISSION MECHANISM, TRANSMISSION MECHANISMS, UNEMPLOYMENT, UNEMPLOYMENT RATE, UNEMPLOYMENT RATES, WAGE RATES, WAGES, WEALTH, WHOLESALE PRICE INDEX BALANCE OF PAYMENTS, CURRENCY, CURRENT ACCOUNT BALANCES, HOUSEHOLD CHARACTERISTICS, INCOME LEVELS, INTEREST PAYMENTS, LABOR SUPPLY, MARKET EQUILIBRIUM, MARKET PARTICIPANTS, PER CAPITA INCOME, REAL INTEREST RATE, STOCKS, URBAN AREAS,
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 https://hdl.handle.net/10986/14030
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