Power Generation and the Business Cycle: The Impact of Delaying Investment

Renato Agurto, Fernando Fuentes (), Carlos García and Esteban Skoknic
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Fernando Fuentes: Facultad de Economía y Negocios, Universidad Alberto Hurtado

ILADES-UAH Working Papers from Universidad Alberto Hurtado/School of Economics and Business

Abstract: This article presents the hypothesis that exogenous shocks in the electricity market can affect the business cycle of the Chilean economy in the short and medium terms. The shocks are identified as the delays in power-generation investment that have characterized the sector in recent years. The delays are due to political decisions and the process of attaining environmental approvals by state agencies. A comparison of different scenarios reveals that after eight years, the country would lose the equivalent of one year of GDP growth, with a consequent reduction in private investment, domestic consumption, and job creation. This result highlights the importance of environmental and energy policy in reducing business cycle fluctuations.

Keywords: Business Cycle; Electric Energy; Bayesian Econometrics; DSGE models (search for similar items in EconPapers)
JEL-codes: E17 E27 E37 L94 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2013-07
New Economics Papers: this item is included in nep-dge, nep-ene and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ila:ilades:inv290

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