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

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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.

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  • Renato Agurto & Fernando Fuentes & Carlos Garcia & Esteban Skoknic, 2013. "Power Generation and the Business Cycle: The Impact of Delaying Investment," ILADES-UAH Working Papers inv290, Universidad Alberto Hurtado/School of Economics and Business.
    • Handle: RePEc:ila:ilades:inv290
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    1. Cansino, José M. & Sánchez-Braza, Antonio & Rodríguez-Arévalo, María L., 2018. "How can Chile move away from a high carbon economy?," Energy Economics, Elsevier, vol. 69(C), pages 350-366.

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    More about this item

    Keywords

    Business Cycle; Electric Energy; Bayesian Econometrics; DSGE models;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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