Oil Price Movements and the Global Economy: A Model-Based Assessment
49 Pages Posted: 13 Feb 2008 Last revised: 9 Sep 2022
There are 2 versions of this paper
Oil Price Movements and the Global Economy: A Model-Based Assessment
Oil Price Movements and the Global Economy: A Model-Based Assessment
Date Written: February 2008
Abstract
We develop a five-region version (Canada, a group of oil exporting countries, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices. In the presence of real adjustment costs that reduce the short- and medium-term responses of oil supply and demand, our simulations can account for large endogenous variations of oil prices with large effects on the terms of trade of oil-exporting versus oil-importing countries (in particular, emerging Asia), and result in significant wealth transfers between regions. This is especially true when we consider a sustained increase in productivity growth or a shift in production technology towards more capital- (and hence oil-) intensive goods in regions such as emerging Asia. In addition, we study the implications of higher taxes on gasoline that are used to reduce taxes on labor income, showing that such a policy could increase world productive capacity while being consistent with a reduction in oil consumption.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment
By Tamim Bayoumi, Douglas Laxton, ...
-
Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment
By Tamim Bayoumi, Douglas Laxton, ...
-
Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment
By Tamim Bayoumi, Douglas Laxton, ...
-
Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assesment
By Tamim Bayoumi, Douglas Laxton, ...
-
By Günter Coenen, Peter Mcadam, ...
-
Welfare-Based Monetary Policy Rules in an Estimated DSGE Model of the Us Economy
By Michel Juillard, Philippe D. Karam, ...
-
By Douglas Laxton and Papa N'diaye
-
By Luc Everaert and Werner Schule
-
DSGE Modeling at the Fund: Applications and Further Developments
By Dennis P. J. Botman, Philippe D. Karam, ...