We numerically examine the impact of the global economic crisis on the Cambodian
garment exports as well as its economy by using the conventional CGE model.
A seminal aspect of the paper is that we have successfully estimated the curvature
of the CET and CES production functions for the Cambodian economy, by using
the time series regression method. One of our most striking results indicates that
the welfare cost of the impact of the crisis at least reaches 281 million US dollars,
thus resulting in a 0.3 percent decrease in GDP with 20.8 thousand direct job losses
in the garment industry. Our simulation results also show that the currently ongoing
policy in Cambodia only reduces the negative impact of the crisis by 32 million
US dollars, and we propose an expansion of the government budget of 304 million
US dollars, in order to neutralize the negative impact of the global economic crisis
on the Cambodian economy.