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External shocks and domestic poverty alleviation: Simulations with a CGE model of Malawi

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  • Löfgren, Hans
  • Chulu, Osten
  • Sichinga, Osky
  • Simtowe, Franklin
  • Tchale, Hardwick
  • Teska, Ralph
  • Wobst, Peter

Abstract

Two sets of issues loom large on the economic horizon of Malawi: poverty alleviation and the country's vulnerability to shocks emanating from the outside world. In this paper, simulations with a Computable General Equilibrium (CGE) model of Malawi are used to analyze aspects of these issues. Two types of poverty-alleviating domestic policy shifts are simulated: a public works program and a land reform program. The public works program may function as an absorber of negative shocks elsewhere in the economy. The land reform program may introduce a structural change in the distribution of factor incomes in favor of the poor. The results for the simulated external shocks confirm that Malawi's economy is highly sensitive to external shocks of the magnitudes that the country has experienced in recent years. The consequences are particularly negative for the non-agricultural population. A more diversified production and export structure would make Malawi less vulnerable to external price shocks and reduce the pressures that lead to sharp exchange rate fluctuations.

Suggested Citation

  • Löfgren, Hans & Chulu, Osten & Sichinga, Osky & Simtowe, Franklin & Tchale, Hardwick & Teska, Ralph & Wobst, Peter, 2001. "External shocks and domestic poverty alleviation: Simulations with a CGE model of Malawi," TMD discussion papers 71, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:tmddps:71
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    References listed on IDEAS

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    1. International Monetary Fund, 1997. "Malawi: Recent Economic Developments," IMF Staff Country Reports 1997/107, International Monetary Fund.
    2. Deininger, Klaus, 1999. "Making Negotiated Land Reform Work: Initial Experience from Colombia, Brazil and South Africa," World Development, Elsevier, vol. 27(4), pages 651-672, April.
    3. Lele, Uma, 1990. "Structural adjustment, agricultural development and the poor: Some lessons from the Malawian experience," World Development, Elsevier, vol. 18(9), pages 1207-1219, September.
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    Cited by:

    1. Pierre‐Richard Agénor, 2004. "Macroeconomic Adjustment and the Poor: Analytical Issues and Cross‐Country Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 18(3), pages 351-408, July.
    2. Narayanan, Sudha & Gulati, Ashok, 2002. "Globalization and the smallholders," MSSD discussion papers 50, International Food Policy Research Institute (IFPRI).
    3. AGENOR Pierre-Richard & IZQUIERDO Alejandro & FOFACK Hippolyte, 2010. "IMMPA: A Quantitative Macroeconomic Framework for the Analysis of Poverty Reduction Strategies," EcoMod2003 330700003, EcoMod.
    4. Sassi, Maria & Cardaci, Alberto, 2012. "Impact of climate change on wheat market and food security in Sudan: stochastic approach and CGE model and CGE Model," 2012 First Congress, June 4-5, 2012, Trento, Italy 124110, Italian Association of Agricultural and Applied Economics (AIEAA).
    5. Agenor, Pierre-Richard & Izquierdo, Alejandro & Fofack, Hippolyte, 2003. "The integrated macroeconomic model for poverty analysis : a quantitative macroeconomic framework for the analysis of poverty reduction strategies," Policy Research Working Paper Series 3092, The World Bank.
    6. Reimer, Jeffrey J., 2002. "Estimating the poverty impacts of trade liberalization," Policy Research Working Paper Series 2790, The World Bank.
    7. Jennifer Mbabazi, 2002. "A CGE Analysis of the Short-run Welfare Effects of Tariff Liberalisation in Uganda," WIDER Working Paper Series DP2002-114, World Institute for Development Economic Research (UNU-WIDER).

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