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Using Macrofinancial Models to Simulate Macroeconomic Developments During the COVID-19 Pandemic: The Case of Albania

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  • Lorena Skufi
  • Adam Geršl

Abstract

The COVID-19 pandemic, and its impact on the economy tested the capacity of current macroeconomic models to forecast economic developments in turbulent times. In this article, we develop a linear macrofinancial model for Albania and examine whether it can predict the developments of key macroeconomic and financial variables during 2020–2021. To address increased uncertainty in the forecasts, we construct uncertainty bands with quantile regressions. The results indicate that, in general, a linear model is flexible enough to analyze non-linear events and may thus be used in abnormal times.

Suggested Citation

  • Lorena Skufi & Adam Geršl, 2023. "Using Macrofinancial Models to Simulate Macroeconomic Developments During the COVID-19 Pandemic: The Case of Albania," Eastern European Economics, Taylor & Francis Journals, vol. 61(5), pages 517-553, September.
    • Handle: RePEc:mes:eaeuec:v:61:y:2023:i:5:p:517-553
    DOI: 10.1080/00128775.2023.2215229
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    More about this item

    JEL classification:

    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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