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Impact of International Financial Shocks on Small Open Economies: The Case of Four ASEAN Countries

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  • Ramayandi, Arief

    (Asian Development Bank)

Abstract

A more integrated global financial system has implications on the economic volatility of small open economies. This paper simulates the impact of a shortterm shock originating from the global financial system on small open economies in the Association of Southeast Asian Nations (ASEAN). The simulation is conducted by means of empirically estimated small open economy dynamic stochastic general equilibrium models for Indonesia, Malaysia, the Philippines, and Thailand. The analysis highlights similarities and differences of the impact of a pure international financial shock on aggregate domestic price inflation and on output gap for each of the four ASEAN countries. It suggests that the impact of such shock on the sampled economies tends to be relatively small but longlasting, hence placing challenges on the task of managing economic volatility in these economies.

Suggested Citation

  • Ramayandi, Arief, 2011. "Impact of International Financial Shocks on Small Open Economies: The Case of Four ASEAN Countries," ADB Economics Working Paper Series 253, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0253
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    References listed on IDEAS

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    Cited by:

    1. Phuong V. Nguyen, 2020. "The Vietnamese business cycle in an estimated small open economy New Keynesian DSGE model," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(5), pages 1035-1063, October.

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    More about this item

    Keywords

    ASEAN countries; economic volatility; global financial system; shock simulation; small open economies;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

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