Modelling the impact of economic coercion
Analysis

Modelling the impact of economic coercion

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16.06.2023 - 07:19

EconomicsInternational

Mandala conducted research in conjunction with the Australian Strategic Policy Institute on the impact of economic coercion on the Australian economy.

Economic modelling can help us understand the impact of 'economic coercion' - tariffs and trade bans that limit export and import relationships between countries.

We conducted econometric modelling using the G-Cubed CGE model to understand alternative scenarios of economic coercion on different countries and sectors.

The first set of scenarios examined impacts on different countries - looking at the impact of trade bans on G7 countries (USA, UK, Canada, Japan, France, Germany, Italy) and Australia.

The second set of scenarios applied the effects to different sectors. This modelled the impact of trade sanctions targeting different sectors including mining, energy, agriculture, durable manufactured goods, non-durable manufactured goods and services.

In total, this implied 42 scenarios of consideration.

Economic coercion results in a range of negative effects and offsetting positive effects for an economy

These negative effects can include reduced prices, output, investment and employment.

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At the same time, markets and exchange rates will adjust - recalibrating for these effects.

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We used the G-cubed Computational General Equilibrium model to understand the impacts of various shocks to the Australian economy - highlighting the economy's resilience.

Through markets re-directing and re-balancing, our economy is more resilient than we may have thought to trade restrictions.

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Read the full report here.

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