Oil and the World Economy : Some Possible Futures

Author/Editor: Michael Kumhof ; Dirk Muir
Publication Date: October 25, 2012
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Summary: This paper, using a six-region DSGE model of the world economy, assesses the GDP and current account implications of permanent oil supply shocks hitting the world economy at an unspecified future date. For modest-sized shocks and conventional production technologies the effects are modest. But for larger shocks, for elasticities of substitution that decline as oil usage is reduced to a minimum, and for production functions in which oil acts as a critical enabler of technologies, GDP growth could drop significantly. Also, oil prices could become so high that smooth adjustment, as assumed in the model, may become very difficult.
Series: Working Paper No. 12/256
Subject(s): Oil production | Demand | Supply | Oil prices | External shocks | Price elasticity | Economic models

Publication Date: October 25, 2012
ISBN/ISSN: 9781475586640/1018-5941 Format: Paper
Stock No: WPIEA2012256 Pages: 31
US$18.00 (Academic Rate:
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