IMPACTS OF EXTERNAL PRICE SHOCKS ON THE PALESTINIAN ECONOMY
Abstract
This paper investigates the impact of import price shocks (known as external price shocks) by 10% from the base line on the aggregate Palestinian economy variables. A simulation of external shocks is carried out using a 2012 Palestinian Social Accounting Matrix (SAM) and Computable General Equilibrium (CGE). The simulation results show that real GDP decreases by 2.91% and nominal GDP declines by 7.54%. Import and export decreases by 23.12 % and 17.37% respectively. The trade deficit will decline by 8.95 % after external price shock. A 10 percent external price shock will reduce the level of private consumption by 14.92 % from the base line and real exchange rate (REXR) will decrease (devalue) by 12.50% from the base line.References
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