Real and Distributive Effects of Petroleum Price Liberalization: The Case of Indonesia

Author/Editor:

Benedict J. Clements ; Sanjeev Gupta ; Hong-Sang Jung

Publication Date:

October 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The impact of higher petroleum prices on the aggregate price level, real growth, and income distribution is appraised within a multisector computable general equilibrium (CGE) model. A reduction in the government subsidy raises petroleum prices and production costs throughout the economy. Consumer demand, production, and income decline as output prices increase and consumer purchasing power decreases. The model is applied to and calibrated for Indonesia. The simulated results predict a slight increase in price level and a slight decrease in output. An important result is that urban household groups will be the most significantly affected by the subsidy reduction.

Series:

Working Paper No. 2003/204

Subject:

Commodities Consumption Income Inflation National accounts Oil Oil prices Prices

English

Publication Date:

October 1, 2003

ISBN/ISSN:

9781451874525/1018-5941

Stock No:

WPIEA2042003

Pages:

19

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