Singapore Business Cycles: A Supply-Side Analysis

This article employs a vector autoregressive (VAR) model to investigate the supply-side causes of business cycles in the small open economy of Singapore. The supply shocks examined are oil price, foreign technology, labour supply, productivity and wage shocks. The empirical results suggest that external and domestic technology shocks are responsible for the bulk of short-term output movements, while labour supply shocks are more important in the long run. In contrast, oil price and wage disturbances play negligible roles in macroeconomic fluctuations. These findings support the view that Singapore business cycles are caused by both domestic and international factors.