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SOURCES OF MACROECONOMIC FLUCTUATIONS IN BRUNEI DARUSSALAM

WEE CHIAN KOH

Crawford School of Public Policy, ANU College of Asia and the Pacific, J. G. Crawford Building, Lennox Crossing, The Australian National University, Acton ACT 2601, Australia

E-mail Address: wc.koh@anu.edu.au

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https://doi.org/10.1142/S0217590816500065Cited by:0 (Source: Crossref)

Abstract

This paper investigates the sources of macroeconomic fluctuations in Brunei Darussalam from 2003Q1 to 2014Q3 using a structural vector autoregression (SVAR) model. Shocks are identified by imposing block exogeneity and long-run restrictions motivated by an open economy model that includes oil prices. The results show that oil price shocks account for only a small proportion of output fluctuations while productivity shocks have the largest share. Real exchange rate movements are largely driven by demand shocks while monetary shocks explain most of the variability in prices. Economic policies should focus on productivity improvement and capital investment to increase output in the long run, and the conduct of fiscal policy should take into account the impact on real exchange rate volatility.

Keywords:

JEL: C32, E32, F41, Q43

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