by xianming meng (sam) mahinda siriwardana and judith mcneill institute for rural futures university...
TRANSCRIPT
byXianming Meng (Sam)Mahinda Siriwardana
and Judith Mcneill
Institute for Rural Futures
University of New England
Australia
Outline of PresentationBackgroundPartial and general equilibriumsAn illustration of CGE modelsGTAP model and simulation
scenariosMacroeconomic effectsSectoral effectsPolicy effectsConclusion
The impact of the global financial crisis on the Asia-Pacific region
Annual change in real GDP (%)
The impact of the global financial crisis on the Asia-Pacific region
Fiscal stimulus: government spending growth rates (%)
The impact of the global financial crisis on the Asia-Pacific region
Partial and general equilibriums (1)
Quantity of Grapes
Price
P*
Q*
D
SEquilibriumQD = Qs
Partial equilibrium: demand equals supply in one or more (but not all) markets.
General equilibrium: demand equals supply in all markets
Can we achieve general equilibrium by equilibrating market one by one?
The impact of the global financial crisis on the Asia-Pacific region
Partial and general equilibriums (2)
Links between markets
1.Input-output linkage2.Labour capital linkage3.Substitutes (e.g. Rice and Wheat) and complements (e.g. Peanut butter and Bread)
So we need to think about the equilibriums of all markets simultaneously.
The impact of the global financial crisis on the Asia-Pacific region
An illustration of CGE models (1)
A simple economic system
The impact of the global financial crisis on the Asia-Pacific region
An illustration of CGE models (2)
A nested production function
ActivityLevel
Good 1 Good G Primary Factors
CES CES
CES
Domestic Good 1 Labour Capital
Imported Good 1
Domestic Good G
Imported Good G
up to
Leontief
Labour type 1
Labour type N
up to
CES
The impact of the global financial crisis on the Asia-Pacific region
An illustration of CGE models (3)Input-Output Table
The impact of the global financial crisis on the Asia-Pacific region
GTAP model113 global regions (countries) and 57
sectors and commodities, 1 global bank, 1 international transportation service, and a representative household and government for each region,
For the purpose of this study they are aggregated into 36 global regions and 28 sectors and commodities.
The impact of the global financial crisis on the Asia-Pacific region
ScenariosScenario 1: 60% decrease in productivity
in all financial sectors and 60% decrease in regional investment.
Scenario 2: Scenario 1 plus 40% decrease in household consumption.
Scenario 3: Scenario 2 plus 20% increase in government spending.
Scenario 4: Scenario 2 plus 20% decrease in production tax rates.
Scenario 5: Scenario 3 plus a 20% increase in the import tariff rate.
The impact of the global financial crisis on the Asia-Pacific region
Macroeconomic results (1)Percentage change in GDP and consumption
The impact of the global financial crisis on the Asia-Pacific region
Macroeconomic results (2)Percentage change in imports and exports
The impact of the global financial crisis on the Asia-Pacific region
Macroeconomic results (3)Percentage change in profitability (industry-average)
The impact of the global financial crisis on the Asia-Pacific region
Macroeconomic results (4)Change in Equivalent Variation (US$ million)
The impact of the global financial crisis on the Asia-Pacific region
Sectoral effects
The impact of the global financial crisis on the Asia-Pacific region
Policy effectsPercentage change in real GDP
The impact of the global financial crisis on the Asia-Pacific region
Conclusions
The impact of the global financial crisis on the Asia-Pacific region
1. An event like GFC has a devastating effect on regions worldwide. It hits harder on the countries with high-exposure through trade, investment or financial mechanism.
2. The rate of return on capital will decrease significantly during an event like the GFC, but international trade will increase when countries try to reduce the cost in order to survive the GFC.
3. The sectoral effects show that most industries will experience contraction, especially for dwelling, recreation, trade, and textile. But industries like public services and construction will expand during the GFC due to the government expansionary fiscal policy.
4. Although both increases in government spending and decreases in production tax rates can mitigate the negative effects of the GFC, production tax cuts appear much more effective. A protectionism policy would aggravate the effect of the GFC.
