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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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Author Info

  • Céline Guivarch

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - AgroParisTech)

  • Stéphane Hallegatte

    (METEO-FRANCE - Météo-France - Météo France)

  • Renaud Crassous

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - AgroParisTech)

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.

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Bibliographic Info

Paper provided by HAL in its series CIRED Working Papers with number hal-00866431.

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Date of creation: Sep 2008
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Handle: RePEc:hal:ciredw:hal-00866431

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Related research

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. Wu, Libo & Li, Jing & Zhang, ZhongXiang, 2013. "Inflationary effect of oil-price shocks in an imperfect market: A partial transmission input–output analysis," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 354-369.
  2. Mathy, Sandrine & Guivarch, Céline, 2010. "Climate policies in a second-best world--A case study on India," Energy Policy, Elsevier, vol. 38(3), pages 1519-1528, March.
  3. 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.
  4. Ruben Bibas & Aurélie Méjean, 2012. "Bioenergy and CO2 Sequestration: Climate Policies Beyond Technological Constraints," Working Papers 2012.88, Fondazione Eni Enrico Mattei.

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