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Uncertainty and monetary policy during the Covid-19 pandemic in Tunisia: Evidence from a Bayesian VAR

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  • Dorra TURKI

    (University of Sfax, Tunisia)

  • Foued Badr GABSI

    (University of Sfax, Tunisia)

Abstract

This paper aims to examine the impact of the uncertainty shock on the Tunisian economy and the effectiveness of monetary policy during the Covid-19 pandemic. For this purpose, we employ a Bayesian VAR model considering the world uncertainty index (WUI) as a new proxy for uncertainty measure and the short-term interest rate as the main instrument of monetary policy. The results indicate that the Covid-19 uncertainty shock has a negative consequence on economic activity and on aggregate demand in Tunisia. Moreover, we show that conventional monetary policy is ineffective in times of high uncertainty period.

Suggested Citation

  • Dorra TURKI & Foued Badr GABSI, 2023. "Uncertainty and monetary policy during the Covid-19 pandemic in Tunisia: Evidence from a Bayesian VAR," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(634), S), pages 177-188, Spring.
    • Handle: RePEc:agr:journl:v:1(634):y:2023:i:1(634):p:177-188
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    References listed on IDEAS

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