A DSGE-based analysis of macroeconomic stability in the India–Middle East–Europe Economic Corridor (IMEC)

This study examines the macroeconomic impact of the India–Middle East–Europe Economic Corridor (IMEC), launched at the 2023 G20 Summit. It constructs standardized GDP-adjusted bilateral distance, trade-to-GDP, and debt-to-GDP measures for 2000–2023. Using an open-economy DSGE framework and the Distance Business Cycle approach, the study develops an IMEC Index via Principal Component Analysis and an autoregressive distance-trade-debt shock. Panel AR and Box–Jenkins estimations indicate that IMEC enhances macroeconomic stability by supporting GDP, investment, capital formation, and consumption, while moderating price levels. The findings underscore IMEC’s role as both a connectivity corridor and a macroeconomic stabilizer fostering rules-based regional integration.