The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model

Céline Guivarch, Stephane Hallegatte and Renaud Crassous
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Renaud Crassous: CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper proposes to test the global hybrid computable general equilibrium model IMACLIM-R against macroeconomic data. To do so, it compares the modeled and observed responses of the Indian economy to the rise of oil price during the 2003-2006 period. The objective is twofold : first, to disentangle the various mechanisms and policies at play in India's economy response to rising oil prices and, second, to validate our model as a tool capable of reproducing short-run statistical data. With default parametrization, the model predicts a significant decrease in the Indian growth rate that is not observed. However, this discrepancy is corrected if three additional mechanisms identified by the International Monetary Fund are introduced, namely the rise in exports of refined oil products, the imbalance of the trade balance allowed by large capital inflows, and the incomplete pass-through of the oil price increase to Indian customers. This work is a first step toward model validation, and provides interesting insights on the modeling methodology relevant to represent an economy's response to a shock, as well as on how short-term mechanisms - and policy action - can smooth the negative impacts of energy price shocks or climate policies.

Keywords: Modèle global d'équilibre général calculable; choc pétrolier; validation de modèle; Global CGE model; Oil shock; Model validation (search for similar items in EconPapers)
Date: 2008-09
Note: View the original document on HAL open archive server: https://hal.science/hal-00866431v1
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The resilience of the Indian economy to rising oil prices as a validation test for a global energy-environment-economy CGE model (2009)
Working Paper: The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model (2009)
Working Paper: The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model (2009)
Working Paper: The Resilience of the Indian Economy to Rising Oil Prices as a Validation Test for a Global Energy-Environment-Economy CGE Model (2008)
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