Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/170010
Title: AN ECONOMETRIC MODEL FOR THE SINGAPORE ECONOMY
Authors: LAI YENG FONG
Issue Date: 1992
Citation: LAI YENG FONG (1992). AN ECONOMETRIC MODEL FOR THE SINGAPORE ECONOMY. ScholarBank@NUS Repository.
Abstract: The use of macroeconomic modelling has been of growing importance in Singapore since the last economic recession in 1986. Government institutions have found them useful in policy making macroeconomic and target setting. Businessmen and managers will find more modelling useful in time to come, especially when comprehensive data are available for analysis and reliable forecasting. macroeconomic This academic exercise essentially attempts to quantify the key relationships of the Singapore economy in a system of 23 simultaneous equations. The behaviourial equations are estimated using quarterly data and Two-Stage Least Squares estimation method. As compared to past models, the investment function is further disaggregated to reflect more realistic relationships with interest rates and labour costs. In addition, the labour market is modelled more explicitly by incorporating the productivity factor. The estimations of the behaviourial equations generally perform well with no significant problem in the disturbance term. To provide a better understanding of the concept of equilibrium in an economy, effort is made in this exercise to apply reduced- formed equations to derive the equilibrium income. A simulation exercise is performed to access the effect of government policy options and other external "shocks" on the national income. The multiplier analysis shows that increasing government expenditure is more effective in raising national income than by increasing money supply. Higher import prices leads to a fall in our income because of the economy's inelastic demand for imports. It is also found that a stronger domestic currency does not hurt our export competitiveness and has the effect of stabilising the economy in the long run. As Singapore economy matures with supply-side constraints, it becomes more susceptible to demand overheating. In view of this, the exercise also explains the implications of the model in relation to some of the current economic issues and suggests some possible solutions to the problems.
URI: https://scholarbank.nus.edu.sg/handle/10635/170010
Appears in Collections:Bachelor's Theses

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