Oil Price Movements and the Global Economy: A Model-Based Assessment
Douglas Laxton (),
Dirk Muir () and
No 13792, NBER Working Papers from National Bureau of Economic Research, Inc
We develop a five-region version (Canada, a group of oil exporting countries, the United States, emerging Asia and Japan plus the euro area) of the Global Economy Model (GEM) encompassing production and trade of crude oil, and use it to study the international transmission mechanism of shocks that drive oil prices. In the presence of real adjustment costs that reduce the short- and medium-term responses of oil supply and demand, our simulations can account for large endogenous variations of oil prices with large effects on the terms of trade of oil-exporting versus oil-importing countries (in particular, emerging Asia), and result in significant wealth transfers between regions. This is especially true when we consider a sustained increase in productivity growth or a shift in production technology towards more capital- (and hence oil-) intensive goods in regions such as emerging Asia. In addition, we study the implications of higher taxes on gasoline that are used to reduce taxes on labor income, showing that such a policy could increase world productive capacity while being consistent with a reduction in oil consumption.
JEL-codes: E66 F32 F47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ene, nep-mac, nep-opm and nep-sea
Note: IFM ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40) Track citations by RSS feed
Published as Selim Elekdag & René Lalonde & Douglas Laxton & Dirk Muir & Paolo Pesenti, 2008. "Oil Price Movements and the Global Economy: A Model-Based Assessment," IMF Staff Papers, Palgrave Macmillan Journals, vol. 55(2), pages 297-311, June.
Downloads: (external link)
Journal Article: Oil Price Movements and the Global Economy: A Model-Based Assessment (2008)
Working Paper: Oil Price Movements and the Global Economy: A Model-Based Assessment (2008)
Working Paper: Oil Price Movements and the Global Economy: A Model-Based Assessment (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:13792
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().