General Equilibrium Resource Elasticity in an Open Resource-Abundant Economy

Mohammad Ebrahim Aghababaei

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the sensitivity of macro and sectoral variables to natural resource revenues in a resource-abundant developing country. Here, different transmission mechanisms are in effect. The paper considers the exchange rate channel, financial sector channel, capital flow channel, public sector channel, and resource reallocation channel. I employ a large scale real-financial general equilibrium model with especial focus on fossil fuel energy, natural resources, financial sector interactions, inter-sectoral linkages, and public sector responses. The model is used to predict the likely changes in oil and gas exports in Iran. It causes more oil exports but at lower international prices. Our comparative static analysis indicates that resource elasticity for GDP is from +0.10 to +0.13; for public services is from +0.16 to +0.27; for import is from +0.42 to +0.45; for mineral extraction is from -0.50 to -0.10, and for the manufacturing sector is from -0.08 to -0.06. The simulation reveals extraction competition among natural resources.

Keywords: General equilibrium; natural resources; Dutch Disease; trade; non-tariff barriers (search for similar items in EconPapers)
JEL-codes: C68 F11 O13 O24 Q33 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-ene, nep-int and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:97851

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