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Real and Distributive Effects of Petroleum Price Liberalization

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Author Info

  • Benedict J. Clements
  • Sanjeev Gupta
  • Hong-Sang Jung
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    Abstract

    The impact of higher petroleum prices on the aggregate price level, real growth, and income distribution is appraised within a multisector computable general equilibrium (CGE) model. A reduction in the government subsidy raises petroleum prices and production costs throughout the economy. Consumer demand, production, and income decline as output prices increase and consumer purchasing power decreases. The model is applied to and calibrated for Indonesia. The simulated results predict a slight increase in price level and a slight decrease in output. An important result is that urban household groups will be the most significantly affected by the subsidy reduction.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/204.

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    Length: 19
    Date of creation: 01 Oct 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/204

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    Related research

    Keywords: Subsidies; Poverty; Oil revenues; Government expenditures; Economic models; subsidy; income groups; household consumption; household groups; input-output; social safety nets; computable general equilibrium; income distribution; social accounting matrix; household income; safety nets; targeted social safety nets; changes in output; fiscal policy; social safety net; changes in prices; safety net; price subsidies; poverty line; interhousehold transfers; changes in poverty; consumption patterns; fiscal deficit; linear expenditure system; demand for labor; fiscal sustainability; vulnerable groups; sectoral composition of output;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Ehtisham Ahmad & Luc E. Leruth, 2000. "Indonesia," IMF Working Papers 00/102, International Monetary Fund.
    2. Benedict J. Clements & Sanjeev Gupta & Emanuele Baldacci & Carlos Mulas-Granados, 2002. "Expenditure Composition, Fiscal Adjustment, and Growth in Low-Income Countries," IMF Working Papers 02/77, International Monetary Fund.
    3. Ravallion, Martin & Huppi, Monika, 1991. "Measuring Changes in Poverty: A Methodological Case Study of Indonesia during an Adjustment Period," World Bank Economic Review, World Bank Group, vol. 5(1), pages 57-82, January.
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    Cited by:
    1. Kangni KPODAR, 2007. "Impact de l’accroissement du prix des produits pétroliers sur la distribution des revenus au Mali," Working Papers 200701, CERDI.
    2. Kangni Kpodar, 2006. "Distributional Effects of Oil Price Changeson Household Expenditures," IMF Working Papers 06/91, International Monetary Fund.
    3. Yusuf, Arief Anshory & Resosudarmo, Budy P., 2007. "Searching for Equitable Energy Price Reform for Indonesia," MPRA Paper 1946, University Library of Munich, Germany.
    4. Jiang, Zhujun & Tan, Jijun, 2013. "How the removal of energy subsidy affects general price in China: A study based on input–output model," Energy Policy, Elsevier, vol. 63(C), pages 599-606.
    5. Kevin Fletcher, 2005. "Increasing Public Sector Revenue in the Philippines," IMF Working Papers 05/22, International Monetary Fund.
    6. Kerkelä, Leena, 2004. "Distortion costs and effects of price liberalisation in Russian energy markets: A CGE analysis," BOFIT Discussion Papers 2/2004, Bank of Finland, Institute for Economies in Transition.

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