Oil and the World Economy: Some Possible Futures
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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. 2012/256
Subject:
Commodities Demand elasticity Economic theory Oil Oil prices Oil production Price elasticity Prices Production
English
Publication Date:
October 25, 2012
ISBN/ISSN:
9781475586640/1018-5941
Stock No:
WPIEA2012256
Pages:
31
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