External Shocks in a Small Open Economy: A CGE - Microsimulation Analysis

Abstract

This paper studies the impact of changes in the external balance of Pakistan. We explain why the economic growth achieved during the past decade was highly dependent on improvements in the external balance. Between 2001 and 2007, Pakistan benefited from an increase in remittances, foreign assistance from bilateral and multilateral sources, and a relatively stable exchange rate. After 2007, this performance came under pressure from external price shocks. The rise in the import prices of petroleum, raw materials and other manufactured goods has the potential to reduce the country's growth performance, impacting the competitiveness of the economy and threatening the gains achieved during past years. We integrate a computable general equilibrium (CGE) model with a microsimulation model to study the effects of changes in foreign savings and import prices faced by Pakistan. An increase in foreign savings leads to an increase in imports and a decrease in exports. The main sectors facing a decline in exports are textiles, leather, cement, and livestock. In this simulation food and oil prices decline and the factors of production that gain are agricultural wage labor and nonagricultural unskilled wage labor. The increase in import prices of petroleum or industrial raw material leads to a reduction in exports. In this simulation the crop sector is negatively impacted and returns to land and profits to farm owners increase, showing a change in favor of agricultural asset owners, while poverty and inequality increase.

Petrol fiyatları, parasal ve döviz kuru şoklarının hisse senedi fiyatlarına asimetrik etkisi: Türkiye için NARDL

“…Petrol fiyatlarının makroekonomik değişkenler üzerine etkisini inceleyen çok sayıda çalışmaya rastlanmaktadır. [Örneğin Wilson (2001) Singapur, Malezya ve Kore için petrol fiyatları, dış ticaret dengesi, reel döviz kuru, Otto (2003) Avusturya için petrol fiyatları, dış ticaret haddi, Ahmed & Donoghue (2010) Pakistan için petrol fiyatları, ihracat, endüstriyel hammadde fiyatları, gelir adaletsizliği; Chen & Hsu (2012) 84 ülke için petrol fiyatları, dış ticaret (ihracat ve ithalat) değişkenleri]. Hisse senedi fiyatları üzerinde petrol fiyatlarının etkisi, petrol şoklarının reel faaliyetlerle ilişkilendirildiği literatür kapsamında değerlendirilmektedir.…”

Impact of Exports on Economic Aggregates of Pakistan

“…However, the consequences of SAFTA were deemed to cause low tariff income for almost all of its members. Ahmed and O'Donoghue (2009) analyzed the impact of variations in external balance of Pakistan developing country on the various economic entities of the economy by employing CGE model. The study integrated the economy into 33 sectors and gauged the impacts of changes in import prices and external savings on these aggregates.…”

Economy-wide Implications of Low Carbon Electricity Based Mass Transport in Nepal

“…The electrification of transport sector is expected to required significant amount of capital investment mostly in the transport and electricity sectors. However, there might be negative effects associated with the flow of foreign investment in the national economy [3,5,16]. Ahmed and O'Donoghue (2010) analysed the effects of foreign investment growth in the form of increase in the level of exogenous foreign saving.…”