Evaluation of external market effects and government intervention in Malaysia's agricultural sector: A computable general equilibrium framework

Abstract The purpose of this study is to evaluate the effects of changes in the external trade environment and domestic economic policies on the agricultural development of Malaysia. The scope of this research also includes providing further insights into the strengths and weaknesses of the computable general equilibrium (CGE) methodology for agricultural policy analysis. The first analysis focuses on the export agriculture sector which encompasses Malaysia's two primary agricultural commodities, rubber and palm oil. Heavily dependent on exports of rubber in the 1950s and 1960s, Malaysia has since built a more diversified economy with strong emphasis on manufacturing. Export agriculture, however, is still an important component of the national economy. The second objective examines the influence of domestic policy on agricultural development. The simulation results demonstrate the growing resiliency of the Malaysian economy to external shocks. Also, they point to the domestic economy's ability to buffer internal Policy‐induced distortions.