scholarly journals The dynamic impact of external shocks on fiscal reaction function in a small open economy

2020 ◽  
Vol 9 (2) ◽  
pp. 84
Author(s):  
Chee Loong Lee
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Structural Var ◽  
Var Model ◽  
Reaction Function ◽  
External Shocks ◽  
Dynamic Impact ◽  
Budgetary Policy ◽  
Fiscal Reaction Function ◽  
The One

Fiscal authorities in a small open economy should utilize its fiscal instrument feedback to external shocks. This paper analyzes the dynamic respond of budgetary policy to external shocks in Malaysia by a Structural VAR model. On the one hand, the results confirm that external shocks have a significant effect on fiscal reaction function variables. On the other hand, the direct consideration of budgetary reaction of Malaysia to external shocks is limited. Therefore, fiscal authorities should enhance its feedback to external shocks to achieve stable and sustain growth.

ASSESSING CHINA'S RENMINBI PEG TO THE U.S. DOLLAR: THE CASE FOR GREATER RMB EXCHANGE RATE FLEXIBILITY

2012 ◽  
Vol 57 (01) ◽  
pp. 1250003 ◽  
Author(s):  
WEI SUN ◽  
LIAN AN
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Structural Var ◽  
Var Model ◽  
Unique Contribution ◽  
Asymmetric Shocks ◽  
Output Fluctuations ◽  
Long Run ◽  
Optimum Currency ◽  
The U.S

This paper assesses China's Renminbi peg to the U.S. dollar using a structural VAR model. One unique contribution of the paper is that we model China as a large open economy in one structural VAR model with the U.S. by utilizing combinations of short- and long-run identification restrictions and relax the small open economy assumption usually imposed on China. Using monthly data for the period of 1990:4 to 2007:12, we find the following. First, U.S. shocks do not explain much of the output fluctuations in China, indicating that the two economies are subject to asymmetric shocks. Optimum currency area theory suggests that more flexibility of the RMB relative to the dollar may be desirable. Second, U.S. shocks explain little of the fluctuations in China's CPI, suggesting that the benefits of importing inflation from the U.S. by pegging to the dollar are minimal, thus more flexibility in the RMB relative to the dollar is feasible. Third, U.S. shocks do not influence China's international competitiveness (REER) to a noticeable extent, suggesting that moving toward more flexibility relative to the dollar may be in China's interest.

scholarly journals External Shocks and the Macroeconomic Response of Small Open Economy: A Structural-VAR Approach for Pakistan

2017 ◽  
Vol 10 (4) ◽  
pp. 336-344
Author(s):  
Abdul Rahman Nizamani ◽  
Muhammad Akram Gilal ◽  
Ali Gul Khushik ◽  
Syed Munawar Sh ◽  
Abidullah Abid
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Structural Var ◽  
External Shocks

Trade Tax Reform in a Small Open Economy with Distributional Objectives and Distortionary Taxation

2002 ◽  
Vol 1 (1) ◽  
Author(s):  
Jeremy Edwards
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Small Open Economies ◽  
Tax Reforms ◽  
Distortionary Taxation ◽  
Nontraded Goods ◽  
Traded Goods ◽  
Consumer Prices ◽  
Distortionary Taxes ◽  
The One

Abstract The paper shows that, if two conditions are satisfied, both radial contraction and concertina trade tax reforms continue to be desirable in a small open economy that differs from the one usually considered by having distributional objectives and using distortionary taxes to raise revenue. The first condition is that some optimisation in the choice of commodity taxes takes place - at a minimum, taxes on nontraded goods must be optimally chosen while taxes on traded goods keep the consumer prices of such goods constant. The second is that pure profits are absent from every household's budget constraint. These conditions mean that some care is required in arguing the case for simple trade tax reforms in small open economies.

scholarly journals The impact of external shocks in East Asia: Lessons from a structural VAR model with block exogeneity

2012 ◽  
Vol 132 ◽  
pp. 35-89 ◽  
Author(s):  
Jean-Pierre Allegret ◽  
Cécile Couharde ◽  
Cyriac Guillaumin
Keyword(s):  
East Asia ◽  
Structural Var ◽  
Var Model ◽  
External Shocks ◽  
The Impact

scholarly journals Analysis of the Propagation Effects of Remittances on the Vulnerability of External Trade of the Republic of Moldova

2021 ◽  
Vol 7 (2) ◽  
pp. 94-120
Author(s):  
Mircea Diavor ◽  
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Impulse Response Function ◽  
External Shocks ◽  
External Trade ◽  
Republic Of Moldova ◽  
Causality Tests ◽  
Balance Of Trade ◽  
The Republic ◽  
Analytical Tools

In the Republic of Moldova remittances have become a much-discussed subject, the country ranking among the economies with the highest share of remittances in terms of GDP. What is more, remittances, unlike FDI, external trade and other sources of income, seem to have a significant impact on economic growth. Republic of Moldova is a small open economy vulnerable to external shocks. We will examine the effect of remittances on the balance of trade by creating an econometric model. Am attempt has also been made to capture the positive and negative spillovers that migrants’ remittances have on a country’s socio-economic development. Within the research a variety of analytical tools are employed including Granger causality tests, unit root tests, coupled with a structural vector auto regression (SVAR), impulse response function (IRF) analyses and variance decomposition. We find that net trade and remittances are closely associated and follow an almost identical path. Remittances have strong effect on the growth of negative net trade of the Republic of Moldova.

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