Changes In Macroeconomic Variables Research Articles

Monetary Policy and Stock Market Return: The Case of Saudi Arabia Interest Rates hikes and Stocks Returns

The purpose of this research is to examine whether changes in macroeconomic variables have an effect on Saudi Arabia's main index, TASI and whether Monetary policy actions produce positive, negative or no effect at all for all listed companies. Accordingly, we examine the stock price adjustment around announcements of changes in interest rates, we examine the impact of a series of interest rate hikes on the stock returns under the main stock index in the Saudi Stock Market, TASI. The data covers four events between 16 March 2021 to 5 October 2022. We use an event study approach, with an estimation window length of [-250,-11] and an event window length of [-10,7], and we apply the OLS market model for daily data. The significance of the cumulative abnormal return CAAR is tested using the t statistics. The empirical results show that TASI responds negatively to three out of four announcements of interest rate hikes. The positive reaction occurs during the July 2022 monetary action. The positive reaction is attributed to the rising oil prices during that period. Finally, the results of this research open a window for future research to examine the impact of interest rates on the Saudi stock market over the long run.

Capital Flow Management Within Macroeconomics Stability Framework in Indonesia (2008 – 2022)

Indonesia is an EMDEs (Emerging Market and Developing Economies) country, and adopting an open economy causes foreign capital flow, especially FDI (Foreign Direct Investment) and PI (Portfolio Investment) can be free flows, and its movements are unpredictable. The movement of capital flows will affect the money supply transmitted to monetary and macroeconomic variables. This study aims to determine the response and contribution of macroeconomic variables to FDI and PI, as well as examining the causality between macroeconomic variables, FDI and PI. This research used the Vector Error Correction Model Granger Causality. The results show that exchange rate and inflation shocks significantly impact FDI and PI. While the results of Granger causality, changes in macroeconomic variables cause changes in FDI and PI. This research recommends that stakeholders continue implementing policy mix and monetary policy to improve exchange rates and inflation stability. In addition, the management of capital flows is still considered because the potential risks posed to the economy are quite large

Determining the Future Direction and Amount of Tax Revenue in Indonesia Using an <i>Error Correction Model </i>(ECM)

The characteristics of how tax revenues, as well as the macroeconomic factors that are expected to influence and determine tax revenues, develop have become the basic macroeconomic assumptions by the government in compiling various components of the posture of the state revenue and expenditure budget to maintain and increase the expected economic growth. To understand the evolution of tax revenues and the impacts of these variables, it is important to investigate the relationship between tax revenues and specific macroeconomic variables. This study aims to identify the effect of macroeconomic variables on Indonesian tax revenues in the long and short term using multiple regression analysis in an error correction model (ECM). The macroeconomic conditions and variables used in this study are gross domestic product (GDP), inflation, interest rates, and exchange rates. This study employed the time-series data from 2000–2019. The ECM method was conducted in the following stages: stationarity test, cointegration test, and ECM regression test. The ECM model is declared valid, if the cointegrated variables are supported by a significant and negative ECT coefficient value. The statistical analysis, i.e. t-statistic, the F-statistic, and the coefficient of determination, were used to evaluate the significance of the ECM model. The results showed that among the four of macroeconomic variables used in this study, GDP has the highest significant effect on the tax revenue. GDP has a highly positive and considerable impact on tax revenue. The increasing of GDP growth is in line with the realization of tax revenue. A strong positive long-term (t-statistic = 13.94075*, P-value = 0.0000) and short-term (t-statistic = 5.515026*, P-value = 0.0001) association is also observed between inflation and tax revenue. Inflation has a favorable and considerable impact on tax income either in long (t-statistic = 2.298586**, P-value= 0.0363) or short term (t-statistic = 2.515695**, P-value = 0.0258). On the other hand, Bank Indonesia interest rate has a negative insignificant effect (t-statistic = −1.542970ᵈ, P-value = 0.1437) in the long run on tax revenue. However, it has a negative significant effect (t-statistic = −2.699231**, P-value = 0.0182) in short-term tax revenue. A rise in interest rates results in the lowered tax revenues due to the reduction of public consumption patterns, and a decrease in public consumption. The exchange rate has a negative negligible connection in long term (t-statistic = −1.045768ᵈ, P-value = 0.3122), as well as in short term (t-statistic = 1.250076ᵈ, P-value = 0.2333) with tax revenue, meaning that tax revenue is not significantly affected by changes in exchange rate. In conclusion, total tax revenues and the four macroeconomic variables have a significant long- and short-term association according to the ECM analysis with an adjusted R² value of 0.985866 and 0.792880, respectively. Changes in future tax revenues are largely determined by the stability of macroeconomic variables. Therefore, it is highly recommended that the government maintain the stability of macroeconomic variables, especially GDP, because GDP has a dominant influence on tax revenues in the long and short term so that the target of tax revenues can be achieved. The ECM analysis applied in this study can explain the effect of changes in macroeconomic variables on the tax revenue in the short and long term; so that the future direction and amount of tax revenue can be determined in preparing the State Budget and projecting the expected level of economic activity growth in a nation.

PENGARUH RISIKO SUKU BUNGA THE FED, RISIKO INFLASI, DAN RISIKO KURS RUPIAH TERHADAP IHSG

There are external (macro) factors such as monetary and fiscal policies that companies can’t control. The rise in interest rates, the depreciation of exchange rates, and the inflation would cause high fluctuations in capital markets. This research aims to analyze the impact of interest rates, Rupiah exchange rate risk against the Dollar, and inflation rates on Composite Index. The approach used is a quantitative approach with the Error Correction Model (ECM) analysis method during the period 2017 – 2022. Independent variables include The Fed's interest rate risk, inflation risk, and Rupiah exchange rate risk, while the dependent variable is stock prices. The research results show that the risk of the Fed interest rate and the risk of the Rupiah exchange rate against the Dollar had a negative and significant effect, while inflation risk had no significant effect on the Composite Index. This research is expected to provide benefits for investors, policy makers, stock regulators, and readers to see the analysis of changes in stock prices due to changes in macroeconomic variables.

Waste generation and macroeconomic drivers: a panel study for European countries and regions

PurposeThe vast amounts of waste generated today threaten economies and societies due to high environmental and management costs. The aim is to investigate the short- and long-term patterns of municipal waste generation (MWG) in response to socio-economic and demographic growth variables at national and regional levels.Design/methodology/approachA panel data approach employing ordinary least squares (OLS), fixed effects (FE), random effects (RE), fully modified least squares (FMOLS) and error correction model (ECM) techniques. A sample of 28 European countries (2000–2020) and 44 European Union (EU) regions (2000–2018) were selected.FindingsDuring periods of economic growth and higher employment rates, consumer confidence tends to increase, leading to elevated levels of consumer spending and consumption. Intensification in the production factors, specifically capital and employment, results in an upsurge in MWG, thereby creating a cycle where waste generation becomes deeply entrenched in the economic system in both the short and long terms. Rapid population growth, attributed to higher fertility rates, is associated with increased MWG. At the regional level, a double-aging process and a shift toward an aging population exert less pressure on MWG in both the short and long term. Promoting higher levels of environment-oriented human development yields various benefits, including the generation of greater knowledge spillovers, enhanced environmental literacy, a shift toward circular thinking and the promotion of greener entrepreneurship. Increased R&D expenditures facilitate the development of innovative waste reduction technologies, fostering improvements in waste management techniques, recycling processes and the utilization of sustainable materials.Research limitations/implicationsThe research examines the short- and long-term adjustments of MWG in response to changes in macroeconomic variables from low aggregation (countries) to high aggregation (regions). By analyzing the relationship between economic growth, urbanization, healthcare system quality, labor market functioning, demographic trends, educational level, technological advancement and MWG, the study fills a research gap and enhances understanding of waste management interventions. However, data availability and waste statistics accuracy should be considered. Future research could explore the relationship between macroeconomic variables and waste generation in sectors beyond MWG, such as industrial or construction waste, for a more comprehensive understanding of waste generation as a whole.Practical implicationsThe positive correlation between economic activity levels and waste generation in both the short and long terms, emphasizes the criticality of investing in waste reduction and recycling infrastructure to mitigate landfill waste. The negative correlation between population density and waste generation stresses the importance of strategic waste facility placement in low-density areas. To effectively manage higher MWG, tailored waste collection systems and initiatives promoting healthy lifestyles are of immense importance. The positive relationship between employment rates and waste generation underscores the necessity of waste reduction programs that generate employment opportunities. The positive correlation between fertility rates and waste generation emphasizes the need for the expansion of extended producer responsibility programs to include products and materials specifically associated with families and child-rearing. Education campaigns and governmental support for research and development (R&D) in waste reduction technologies are also integral components of an effective waste management strategy.Originality/valueThe short- and long-term adjustments of MWG reacts to shifts in macroeconomic variables from low aggregation (countries) to high aggregation (regions). Previous research has neglected the long-term information contained in variables by not incorporating the lagged error correction term (ETM). Neglecting this aspect could result in imprecise estimates of the elasticities.

The Impact of Macroeconomic Variables on Stock Market Performance in Ghana

The study used monthly data from 2010 to 2021 to consider the impact of macroeconomic variables on stock market performance in Ghana. Inflation rates, interest rates, exchange rates, and global economic policy uncertainty were the macroeconomic variables studied. Because the study was based on numerical secondary data, the study used a quantitative research approach. The study employed a correlation test to determine the relationship between variables. Only two of the four macroeconomic variables studied (interest rates and global economic policy uncertainty) had an impact on Ghanaian stock performance, according to the study. The study revealed that Ghana's stock market performance is unaffected by inflation or the exchange rate. Global Economic Policy Uncertainty, Interest Rate, and Inflation had a negative relationship with stock returns and were not statistically significant, however, Exchange Rate was statistically significant and positively correlated with stock returns. The study recommends maintenance and implementation of conservative macroeconomic policies, as changes in macroeconomic variables have an impact on stock returns, to strengthen support from stock actions.

A macroeconomic viewpoint using a structural VAR analysis of silver price behaviour

This article investigates silver price as a fluctuating commodity price since the financial crisis of 2007–2009. In this regard, a structural vector autoregression (VAR) was applied to observe the sensitivity of the silver price and future pricing due to changes in macroeconomic variables and to review changes in macroeconomic variables due to changes in the silver price. The main results show that the silver price is susceptible to changes in the gold price, increasing sideways. A shock to OECD GDP caused the silver price to increase which makes logical sense, thus showing a positive correlation between output and the silver price. A shock to the oil price caused the silver price to spike over the short term, then move sideways over the long term. A shock to the US Federal funds rate caused the silver price to dip over the short term, then increase slightly over the medium and move sideways over the long term, while a shock to the real effective exchange rate of the USA caused the silver price to increase sideways. The article sheds some light on the reactive status of the silver price to macroeconomic variables and its influence as a safe haven commodity.

Macroeconomic Variables That Influence the Determination of Interest Rate: Evidence from Sri Lanka

The interest rate is one of the main tools used to governor monetary policy in Sri Lanka. The main objective of this research was identifying the Macroeconomic variables that Influence to determine the Interest Rate: Evidence from Sri Lanka. Changes in macroeconomic variables affect to determine interest rate. At present, there are some consensus on the answers to these questions. This paper examines to identify Macroeconomic variables that influence the determine the interest rate in Sri Lanka and identify the relationship between interest rate and macro-economic variables. The model of this study was estimated using quarterly data from 2004:Q1 to 2015:Q4. This study uses Macro-economic variables such as money supply, budget deficit, inflation, and economic growth. This study uses Average Weighted Prime Lending Rate (AWPR), and 3-month T bill rate as benchmark interest rates in Sri Lanka. Variables were initially tested for stationery and autocorrelation, and both inflation and budget deficit were found as non-stationary, the first difference of these variables was considered. There was no autocorrelation amongst any of the variables. Granger causality tests use for finding the interrelationships between the variables in the model. looking at the overall models, it was seen that both models was significantly represented by their F-values, only the first difference of inflation and real GDP were significant in both models. There was no direct causation of interest rates from changes in inflation and real GDP. It was observed that collectively both money supply and budget deficit had a significant impact on the level of interest rates. The R-squared values are in the range of 25%. The conclusion of the study is the explanatory variables are weakly affected to determining interest rates in Sri Lanka during the reference period. Further found that all the macro-economic variables showed a positive linear relationship with the T bill rate and AWPR in Sri Lanka.

NON-PERFORMING LOANS, MACROECONOMIC AND BANK-SPECIFIC VARIABLES IN SOUTHEAST ASIA DURING COVID-19 PANDEMIC

This study examines the relationship between bank-specific variables, macroeconomic variables and non-performing loans (NPLs) in the seven countries of Southeast Asia (Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) during the pre-COVID-19[Formula: see text]and COVID-19 pandemic. This study adopts panel data regression and distributed lagged regression to examine the impact of bank-specific variables and macroeconomic variables as NPL determinants. The results show that bank-specific variables significantly correlate to NPL, but limited evidence indicates the influence of macroeconomic variables during pre-COVID. Nonetheless, macroeconomic variables are significant to NPL with the emergence of the pandemic, while the bank-specific variables are found to be insignificant. It shows that macroeconomic variables have a greater impact during the turbulent period as they affect most businesses, especially during the pandemic. Furthermore, macroeconomic variables are observed to have a stronger influence on developed countries, but the impact of bank-specific variables is stronger in emerging countries. The results of this study assist policymakers, regulators, banks and governments in identifying the determinants of high NPL as the indicator of a financial crisis. Greater emphasis shall be given to the changes in macroeconomic variables.

Relating stock market performance to macroeconomic variables in developing economies

Given the uniqueness of the stock market in Sub-Saharan Africa (SSA) and the fact that empirical conclusions have always been drawn based on more advanced stock markets, it becomes necessary to investigate the nexus between stock market performance and selected macroeconomic variables in SSA countries. With a purpose of unveiling the relationship between stock market performance and selected macroeconomic variables, the uniqueness and relevance of the paper stems from the fact that it looks at developing stock markets in a developing macroeconomic environment, and it covers the period from 1997 to 2018. The Panel-Autoregressive Distributed Lag model supported by a good number of pre- and post-estimation techniques was used as the estimation technique and the datasets which are of secondary nature were drawn from the World Development Indicators. The study’s findings revealed that stock market indicators responded relatively to macroeconomic indicators in the long run and were adjusted to the shocks and dynamics of the changing macroeconomic environment. The findings confirmed that the nexus between broad money supply and the dependent variables for the two models was a mixed one. The findings arising from this study shown by the short run adjustment of stock market performance to changes in macroeconomic variables is important for governments to interpret and make policies on contemporaneous effects and forecast of the dynamism of the stock market and macroeconomic linkage

The Effect of BI Interest Rate, Exchange Rate, and Inflation on The Indonesian Sharia Stock Index (ISSI)

The development of the capital market has experienced quite good growth in Indonesia, including the Islamic capital market. The existence of a sharia capital market with various investment instruments such as sharia shares, sukuk, and sharia mutual funds provides investment opportunities for those who wish to invest with sharia principles. The development of sharia investment instruments, especially sharia shares, continues to show improvement. It is then supported by the Indonesia Stock Exchange (IDX) by issuing the Indonesian Sharia Stock Index (ISSI) which is a benchmark for the performance of sharia shares in Indonesia. The development of the Sharia Stock Index has continued to increase since it was published although it experienced fluctuations in several periods. It is presumably due to changes in macroeconomic variables. Therefore, the study aims to analyze the effect of the BI interest rate variable, exchange rate, and inflation on the Indonesian Sharia Stock Index (ISSI) for the period 2015 to 2020. The study uses quantitative methods, with data analysis The Error Correction Model (ECM) uses the EViews version 9 application, ECM analysis to determine long-term and short-term economic phenomena from the interaction of several research variables. The results obtained show that in the long term, the exchange rate and BI interest rate variables have an influence on the Indonesian Sharia Stock Index (ISSI) while in the short term the exchange rate variable has an influence on the Indonesian Sharia Stock Index (ISSI). Whereas, the inflation variable has no effect on the Indonesian Sharia Stock Index (ISSI) in the long and short term.

Analisis Volatilitas Variabel Makroekonomi dan Harga Saham Menggunakan Generalized Autoregressive Conditonal Heteroscedasticity (Garch Model)

Macroeconomic variables often have an impact on stock price volatility and this is needed especially to determine stock price policies in the future. The approach used to see the extent of the volatility of macroeconomic variables on stock prices is the ARCH/GARCH model. This study aims to analyze the nature of stock price volatility in the food and beverage industry in Indonesia using ARCH/GARCH. The data used in this study is secondary data, namely the stock prices of food and beverage industry companies during the period January 2015 to May 2021. The analysis of stock price volatility was carried out with the help of the Eviews 9 software. The results showed the characteristics of the stock price volatility of food and beverage companies based on the ARCH model. /GARCH is quite risky in the short term but not in the long term (indicated by macroeconomic variables of exchange rates, short-term interest rates), so that stock price movements can be anticipated as an early warning system of an increase or decrease in stock prices in the sector. In addition, it can be estimated that the volatility of stock prices in the future is moderate with changes in macroeconomic variables. For policy makers to anticipate changes in macroeconomic variables in certain situations, such as during the current Covid 19 pandemic.

Stock Prices’ Response Towards Macroeconomic Shocks in Listed Malaysian Property and Construction Companies

This study seeks to determine the impact of macroeconomic shocks on both sectors’ stock prices. Due to the similarity in their activities, this study aims to discover if changes in macroeconomic variables affect their stock prices. The stock price movement behavior of the stocks from these two sectors is investigated to assist investors in estimating the profitability of the stocks in property and construction sectors in Malaysia and to assist the government in developing policies to curb speculation in the stock market. The impact of macroeconomic shocks on both sectors’ stock prices is evaluated to provide insight to investors and policy makers to prepare them for sudden changes in government monetary policies. This is investigated through the impulse response functions (IRF) and variance decomposition analysis. Annual data from 1995 to 2013 are evaluated and the IRF results indicate that interest rate changes influence stock prices the most while trade openness has the least effect on the stock prices.

Impact of some Macroeconomic Variables on Tax Revenue in Nigeria

The knowledge of the relationship between tax revenue and the interplay of macroeconomic factors is necessary to maximize the gains of the proposed elimination of non-tariff barriers by the African Union. This study was carried out to investigate the impact of trade liberalization and six macroeconomic variables on tax revenue in Nigeria from 1981-2019, using the autoregressive distributed lag (ARDL) approach to cointegration and the Error Correction Model (ECM). The unrestricted error-correction model was specified in the study by modifying ARDL model. Total tax and domestic tax revenues were predicted by trade liberalization and most macroeconomic variables examined. A unit increase in trade liberalization triggered an increase of 3% in both total and domestic tax revenues when all other variables in the model were held constant. The results of ECM showed that short run and long run equilibrium were present in the system. The macroeconomic variables found to be predictors of both domestic and external tax revenues are share of petroleum and mining in GDP, foreign direct investment, share of agriculture in GDP, per capita income, exchange rate and inflation rate. These are therefore important to explain tax revenue in Nigeria. The key policy recommendation for improved and sustained tax revenue is to embark on comprehensive trade liberalization policies as well as regulate changes in macroeconomic variables.

The Influence Money Supply, Inflation and Transaction Volume on Consumer Goods Index

Investments in the capital market have a high level of risk but also provide high profits, so it is very important to know changes in macroeconomic variables and investor behavior. In this study will examine the effect of the money supply, inflation volume, and transactions on the Consumer Goods Index.The partial test results show that the money supply and transaction volume have a significant positive effect on the consumer goods index, but inflation has no significant effect on the consumer goods index.Simultaneous testing shows that all variables have a significant influence on a good consumer index. The results show that all variables of money supply, inflation and transaction volume can explain 74.90%, and 25.10% are explained by other factors outside the research variable.

Responsiveness of Volatility Analysis of the Jakarta Islamic Index on Macroeconomic Variables

This study aims to analyze the influence and response of the Jakarta Islamic Index (JII) volatility to changes in macroeconomic variables. VECM was used to examine the long-and short-term effects, while IRF was used to analyze the JII response. Data were obtained from BPS, BI, and Yahoo Finance monthly from 2015-2020 using global macroeconomic fiscal variables, including inflation, BI and Exchange Rates, Industrial Production Index, World Oil Price, Malaysia Hijrah Shariah Index, and DJIM Malaysia Titan 25 Index. The results show that JII is influenced by inflation variables, BI rate, IPI, OP, MHS, and DJIM in the long term but not the exchange rate. Furthermore, it is influenced by BI rate, IPI, OP, MHS, and DJIM in the short term, while the exchange rate and inflation have no significant effect. Macroeconomic variable shock influence JII by 52,27% while the rest is influenced by other variables outside the model. This research implies that the JII index is very sensit ive to economic changes.

Beyond oil: the international integration of the Russian economy between macroeconomic constraints and sectoral dynamics

ABSTRACT This study provides new insights into the internal dynamics and international integration of non-rentier sectors in Russia. Our approach consists in analysing the evolution of two non-rentier industries (agri-food and software), focusing on three groups of variables characterising their institutional environment, namely the macroeconomic context, public policies, and private strategies pursued by the main players. Based on the analysis of quantitative and qualitative data coming from field surveys and statistical databases, we introduce distinct forms of international integration that shed light on the players’ strategies in adapting to changes in macroeconomic variables. The following paradox emerged: although the macroeconomic constraints stemming from rent should have hindered the development of non-rentier sectors in a scheme characteristic of the classical ‘Dutch disease’ framework, we have observed that these two industries have been able to continue to develop, each following its own path. Our analysis shows that the mix of constraints and opportunities faced by these industries has shaped their partial autonomy vis-à-vis the rent-based ‘accumulation regime’ characteristic of the country.

Regime-dependent effects of selected macroeconomic variables on CO<SUB align="right">2 emissions: evidence from China

The aim of this study is to examine the nonlinear effects of the macroeconomic variables on CO2 emission level and to determine how the cyclical patterns of carbon emission growth change along the changes in macroeconomic variables' growth rate under a regime switching mechanism in China employing nonlinear Granger causality and Markov-switching dynamic regression models. The results show no bidirectional causality between carbon emission level and the macroeconomic variables used in the model. The cyclical relationship between carbon emission level and income was negative in the high emission regime, but it became positive once a low-emission growth regime was reached. Specifically, the negative sign on GDP growth under the high-emission growth regime and the positive sign on GDP growth under low-emission growth regime and, furthermore, the changing cyclical behaviour of emissions growth with the continuous upward trend of GDP is compatible with the existence of an N-shaped EKC in the case of China.

Out-of-pocket spending for contraceptives in Latin America

Despite progress in increasing the use of modern contraceptives in most Latin American countries over the last few decades, important challenges remain, including the heavy reliance on out-of-pocket spending to access contraceptives, which may expose consumption to macroeconomic fluctuations. Out-of-pocket spending on contraceptives and/or the proportion of women aged 15–49 who received free contraceptives at a public health facility or as part of statutory health insurance were estimated for 13 Latin American countries using the most recently available household budget surveys and demographic and health or similar household surveys. Data on contraceptive retail sales in 12 countries over the 2006–2010 period and publicly available macroeconomic indicators were used to examine the relationship between changes in sales and macroeconomic indicators using multiple regression models. On average, women aged 15–49 spent close to US$1 per month out-of-pocket on contraceptives. However, almost three out of five women received them free of charge. A 1% increase in the percentage of the population living on less than US$ 3.2/day (2011 PPP values), or the percentage unemployed in the labour force, predicted about a 2% decrease in the growth of contraceptive retail sales (measured in couple-years of protection, CYP, per capita) the subsequent year. The analysis revealed the sensitivity of contraceptive retail sales to changes in macroeconomic variables, particularly changes in poverty levels. Achieving universal access to family planning by 2030 will require improving contraceptive financing schemes.

Employment incentives and the disaggregated impact on the economy. The Italian case

Over the past two decades, the Italian labour market has undergone a number of profound changes. A thorough analysis of these changes shows that there has been a progressive employment polarisation, although with a very peculiar dynamics. While employment did grow in high-skill and low-skill occupations, and it shrank in the medium-skill ones, these changes did not take place simultaneously, as polarisation assumes. Moreover, wage polarisation is hardly observable in the same period. Quite differently, Italy has been characterised by relatively low or even declining returns to education along with progressively decreasing wages in the low-skill segment of the labour market. In this context, we study the potential of an employment incentive policy, for which we imagine two options, one targeting workers in high-skill and the other in low-skill occupations. The objectives of the policy are enhancing aggregate employment and improving working conditions (wages) either in high-skill or low-skill occupations, depending of the option. For the simulation of the two policy options, we employ an integrated model that combines a macro disaggregated and multi-sectoral Computable General Equilibrium (CGE) model with a micro-simulation model. While the CGE model evaluates how the macroeconomic shock reverberates on the labour demand at industry level, the micro-simulation model computes how the changes in macroeconomic variables affect households’ decisions in terms of labour supply and final consumption.