The effects of macroeconomic shocks on the Brunei economy: a sign restriction approach

Wee Chian Koh

Journal of the Asia Pacific Economy, 2017, vol. 22, issue 3, 414-428

Abstract: This paper examines the impact of oil price, foreign monetary policy, and domestic government spending shocks on the Brunei economy from 2003Q1 to 2014Q3 based on a structural vector autoregression model with shocks identified using the sign restriction methodology. The results show that an unanticipated oil price decline has a negative effect on government expenditure, and consequently non-oil GDP. Foreign monetary policy shocks also affect the economy through their impact on the interest rate, prices, and the real exchange rate. The procyclical fiscal stance, which exacerbates the business cycle, is an important source of macroeconomic fluctuations. Government expenditure smoothing should be accorded high importance in the conduct of fiscal policy. This could be achieved by using oil reserve funds to finance budget deficits to delink government spending from volatile oil revenue.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/13547860.2016.1261497 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:rjapxx:v:22:y:2017:i:3:p:414-428

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rjap20

DOI: 10.1080/13547860.2016.1261497

Access Statistics for this article

Journal of the Asia Pacific Economy is currently edited by Leong Liew

More articles in Journal of the Asia Pacific Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().