What Drives Tunisian Business Cycles?

In this paper, we try to shed light on the following question «Can the New Neoclassical Synthesis presuppositions be validated on the Tunisian business cycle?” To do this, we adopt structural VAR model for a small open economy after describing the stylized facts. The study examines five types of shocks: external shock, financial shock, inflation shock, monetary shock, and supply shock. According to the dynamic impulse responses function, supply shock, monetary shock, and external shock have an effect on the Tunisian business cycle. We also note that the effects of the first two shocks are transitory and deeper compared to the external shock. The latter shock shows a persistent effect on the Tunisian economic fluctuations in the long term. This result is also confirmed by the variance decomposition results. Firstly, the paper finds compatibility between stylized facts and the structural VAR model estimations. Secondly, the estimations highlight in particular the importance of monetary shock on the real sphere of the Tunisian economy. The results allow us to confirm the assumptions of the New Neoclassical Synthesis on a small open economy such as Tunisia.