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The resilience of the Indian economy to rising oil prices as a validation test for a global energy-environment-economy CGE model

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  • Guivarch, Céline
  • Hallegatte, Stéphane
  • Crassous, Renaud

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 parameterization, 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.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 37 (2009)
Issue (Month): 11 (November)
Pages: 4259-4266

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Handle: RePEc:eee:enepol:v:37:y:2009:i:11:p:4259-4266

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Web page: http://www.elsevier.com/locate/enpol

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Keywords: Global CGE model Oil shock Model validation;

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References

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Citations

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Cited by:
  1. Libo Wu & Jing Li & ZhongXiang Zhang, 2011. "Inflationary effect of oil-price shocks in an imperfect market: a partial transmission input-output analysis," Economics Study Area Working Papers 115, East-West Center, Economics Study Area.
  2. Liu, Zhen & Lieu, Jenny & Zhang, Xiliang, 2014. "The target decomposition model for renewable energy based on technological progress and environmental value," Energy Policy, Elsevier, vol. 68(C), pages 70-79.
  3. Ruben Bibas & Aurélie Méjean, 2012. "Bioenergy and CO2 Sequestration: Climate Policies Beyond Technological Constraints," Working Papers 2012.88, Fondazione Eni Enrico Mattei.
  4. Céline Guivarch & Renaud Crassous & Olivier Sassi & Stephane Hallegatte, 2011. "The costs of climate policies in a second best world with labour market imperfections," Post-Print halshs-00724487, HAL.
  5. Sandrine Mathy & Céline Guivarch, 2010. "Climate policies in a second-best world- a case study on India," Post-Print halshs-00724498, HAL.

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