Geopolitical Shock Transmission in Thailand: A Narrative SVAR–CGE Framework for Macroeconomic and Distributional Analysis

Geopolitical shocks affect small open economies through multiple, correlated channels, yet applied CGE analyses typically impose the timing and persistence of those shocks by assumption. This paper develops a two-stage SVAR–CGE framework that links econometrically identified shock dynamics to general-equilibrium welfare evaluation for Thailand. First, a seven-variable narrative SVAR estimated on monthly data for 2000–2025, identified using the Caldara–Iacoviello Geopolitical Risk Index, is used to recover the persistence of five transmission channels: oil prices, shipping costs, exchange rates, tourism demand, and private investment. Second, these estimated persistence parameters discipline the shock paths in a 22-sector recursive comparative-static CGE model calibrated to Thailand’s 2025 Social Accounting Matrix and simulated over three annual periods using a present-value integral transformation. Under the baseline shock bundle, GDP declines by 3.18% and CPI increases by 5.49%, with welfare losses exhibiting a bimodal distributional pattern—largest for Q1 through consumption-share exposure and for Q4 through tradeable-sector intensity—departing from the monotonically regressive pattern in single-channel analyses. Policy simulations show that targeted transfers calibrated to income rank dominate a universal fuel subsidy on fiscal efficiency, welfare effectiveness (welfare multiplier 1.377 vs. 0.334), and progressivity (1.00 vs. 0.94), at half the fiscal cost (1.48% vs. 2.97% of baseline GDP). An additional bimodal-targeting scenario (S4) at identical fiscal cost underperforms income-rank targeting on all metrics, confirming the latter as the robust second-best instrument under LES preferences with strong MPC heterogeneity. These rankings are supported by the central calibration of a 9-point sensitivity grid, with partial corroboration at off-baseline configurations. The paper contributes by showing that empirically disciplining inter-annual shock dynamics in CGE analysis can materially alter policy conclusions under correlated multi-channel external shocks, shifting the preferred response from sector-specific price subsidies toward demand-side household transfers.