Energy Business Cycles

37 Pages Posted: 22 Jan 2016

See all articles by David Meenagh

David Meenagh

Cardiff University Business School

Patrick Minford

Cardiff University Business School; Centre for Economic Policy Research (CEPR)

Olayinka Oyekola

University of Exeter INTO

Date Written: November 1, 2015

Abstract

We find that, when estimated, a two sector computable dynamic stochastic general equilibrium open economy model of the U.S. that formally admits energy into the production process can generate plausible parameter values that can be applied to deal with a broad range of economic issues. As a benchmark, we require that the model fits the data for output, real exchange rate, energy use, and consumption: output because it serves as a measure of a country's total income; real exchange rate because it serves as a determinant of a country's relative competitiveness; energy use because it serves as an indicator of special inputs into a country's production process; and consumption because it serves as a yardstick for evaluating a country's standard of living. Finally, we argue that this model, with appropriate extensions, some of which we also propose, can help future modelers to tackle other research questions.

Keywords: Two sector, US DSGE model, Oil price volatility, Open economy, Indirect inference

JEL Classification: E32, D58, F41, C52, Q43

Suggested Citation

Meenagh, David and Minford, Patrick and Oyekola, Olayinka, Energy Business Cycles (November 1, 2015). Available at SSRN: https://ssrn.com/abstract=2719349 or http://dx.doi.org/10.2139/ssrn.2719349

David Meenagh

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5198 (Phone)
+44 29 2087 4419 (Fax)

Patrick Minford

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5728 (Phone)
+44 29 2087 4419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Olayinka Oyekola (Contact Author)

University of Exeter INTO ( email )

Stocker Rd
Exeter, EX4 4PY
United Kingdom

HOME PAGE: http://www.olayinkaoyekola.com

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