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Simple Model for a Small Open Economy: An Application to the ASEAN-5 Countries

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  • Arief Ramayandi

    () (Center for Economics and Development Studies Dept. of Economics, Padjadjaran University)

Abstract

This paper examines the suitability of a simple structural small open economy model in characterising the economic dynamics in five ASEAN economies. The model is a variant of a small open economy model with imperfect competition and nominal rigidities. It is then confronted to the data using maximum likelihood estimation. The structure of the underlying model is able to produce estimated parameters that largely capture the economic characteristics and dynamics of each of the economies in a plausible manner. It enables one to compare and contrast the behaviour of the five economies under consideration, particularly their monetary transmission mechanism. The estimation results are then used to revisit the structural shocks correlation issue in the region, and can also be used as the basis for constructing the relevant approximation for the aggregate welfare function for each of the economies.

Suggested Citation

  • Arief Ramayandi, 2008. "Simple Model for a Small Open Economy: An Application to the ASEAN-5 Countries," Working Papers in Economics and Development Studies (WoPEDS) 200801, Department of Economics, Padjadjaran University, revised May 2008.
  • Handle: RePEc:unp:wpaper:200801
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    File URL: http://ceds.feb.unpad.ac.id/wopeds/200801.pdf
    File Function: First version, 2008
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    References listed on IDEAS

    as
    1. Timothy Kam & Kirdan Lees & Philip Liu, 2009. "Uncovering the Hit List for Small Inflation Targeters: A Bayesian Structural Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 583-618, June.
    2. V. V Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 533-563.
    3. Arief Ramayandi, 2006. "Reliability of Structural Shocks Estimates from a Bivariate SVAR Model: The Case of Southeast Asian Countries," Asia Pacific Economic Papers 357, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
    4. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, November.
    5. Changmo AHN & Hong-Bum KIM & Dongkoo CHANG, 2006. "Is East Asia Fit For An Optimum Currency Area? An Assessment Of The Economic Feasibility Of A Higher Degree Of Monetary Cooperation In East Asia," The Developing Economies, Institute of Developing Economies, vol. 44(3), pages 288-305.
    6. Eric Parrado, 2004. "Singapore's Unique Monetary Policy; How Does it Work?," IMF Working Papers 04/10, International Monetary Fund.
    7. Gordon de BROUWER & Arief RAMAYANDI & David TURVEY, 2006. "Macroeconomic Linkages and Regional Monetary Cooperation: Steps Ahead," Asian Economic Policy Review, Japan Center for Economic Research, vol. 1(2), pages 284-301.
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    Cited by:

    1. Arief Ramayandi, 2009. "Assessing Monetary Policy Efficiency in the ASEAN-5 Countries," Working Papers in Economics and Development Studies (WoPEDS) 200902, Department of Economics, Padjadjaran University, revised Mar 2009.
    2. Dutu, Richard, 2016. "Why has economic growth slowed down in Indonesia? An investigation into the Indonesian business cycle using an estimated DSGE model," Journal of Asian Economics, Elsevier, vol. 45(C), pages 46-55.

    More about this item

    Keywords

    ASEAN; small open economy model; maximum likelihood estimation;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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