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Impacts of External Price Shocks on Malaysian Macro Economy-An Applied General Equilibrium Analysis

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Author Info
Al-Amin, Abul Quasem
Siwar, Chamhuri
Jaafar, Abdul hamid

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Abstract

This paper examines the impacts of external price shocks in the Malaysian economy. There are three simulations are carried out with different degrees of external shocks using Malaysian Social Accounting Matrix (SAM) and Computable General Equilibrium (CGE) analysis. The model results indicate that the import price shocks, better known as external price shocks by 15% decreases the domestic production of building and construction sector by 25.87%, hotels, restaurants and entertainment sector by 12.04%, industry sector by 12.02%, agriculture sector by 11.01%, and electricity and gas sector by 9.55% from the baseline. On the import side, our simulation results illustrate that as a result of the import price shocks by 15%, imports decreases significantly in all sectors from base level. Among the scenarios, the largest negative impacts goes on industry sectors by 29.67% followed by building and construction sector by 22.42%, hotels, restaurants and entertainment sector by 19.45%, electricity and gas sector by 13.%, agriculture sector by 12.63% and other service sectors by 11.17%. However significant negative impact goes to the investment and fixed capital investment. It also causes the household income, household consumption and household savings down and increases the cost of livings in the economy results in downward social welfare.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9308.

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Date of creation: 25 Jul 2008
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Handle: RePEc:pra:mprapa:9308

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Keywords: External Price Shocks Applied General Equilibrium Analysis Malaysian economy

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Find related papers by JEL classification:
F0 - International Economics - - General
F1 - International Economics - - Trade

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  4. Eastwood, Robert K, 1992. "Macroeconomic Impacts of Energy Shocks," Oxford Economic Papers, Oxford University Press, vol. 44(3), pages 403-25, July. [Downloadable!] (restricted)
  5. Ana Maria Herrera & James Hamilton, 2001. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy," University of California at San Diego, Economics Working Paper Series 2001-10, Department of Economics, UC San Diego. [Downloadable!]
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  7. Bernanke, Ben S & Gertler, Mark & Watson, Mark W, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Reply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 287-91, April.
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  11. Robert H. Rasche & John A. Tatom, 1977. "The effects of the new energy regime on economic capacity, production, and prices," Review, Federal Reserve Bank of St. Louis, issue May, pages 2-12. [Downloadable!]
  12. Carlo Perroni & Randall M. Wigle, 1994. "International Trade and Environmental Quality: How Important Are the Linkages?," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 551-67, August. [Downloadable!] (restricted)
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