Simple Model for a Small Open Economy: An Application to the ASEAN-5 Countries

Arief Ramayandi ()

No 200801, Working Papers in Economics and Development Studies (WoPEDS) from Department of Economics, Padjadjaran University

Abstract: This paper examines the suitability of a simple structural small open economy model in characterising the economic dynamics in five ASEAN economies. The model is a variant of a small open economy model with imperfect competition and nominal rigidities. It is then confronted to the data using maximum likelihood estimation. The structure of the underlying model is able to produce estimated parameters that largely capture the economic characteristics and dynamics of each of the economies in a plausible manner. It enables one to compare and contrast the behaviour of the five economies under consideration, particularly their monetary transmission mecha- nism. The estimation results are then used to revisit the structural shocks correlation issue in the region, and can also be used as the basis for constructing the relevant approximation for the aggregate welfare function for each of the economies.

Keywords: ASEAN; small open economy model; maximum likelihood estimation (search for similar items in EconPapers)
JEL-codes: C13 D58 E12 E17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2008-05, Revised 2008-05

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