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Gauging the Impact of Higher Capital and Oil Costs on Potential Output

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  • Boris Cournède

Abstract

The 2007-2009 period has been characterised by an oil shock followed by a financial crisis. Higher oil prices and the prospect of higher borrowing costs are likely to reduce the productive potential of OECD economies. The present study provides illustrative numerical estimates of the impact under different scenarios using a stylised model based on a production function. In a scenario where real borrowing costs for firms return to their 1991-2001 average as opposed to staying at the level at which the capital stock in place at the end of 2007 had been invested, the impact on equilibrium GDP could be in the order of 2%. If the real oil price stays at $80 per barrel, up from the $50 average at which the capital stock in place in 2007 had been invested, the impact on equilibrium GDP could be in the order of 1%. Une évaluation de l'impact de l'augmentation des coûts du capital et du pétrole sur le potentiel de production La période 2007-2009 a été caractérisée par un choc pétrolier suivi d’une crise financière. Des prix de l’énergie plus élevés et la perspective d’un renchérissement du coût du crédit réduisent probablement le potentiel productif des pays de l’OCDE. La présente étude propose d’illustrer ces effets par des évaluations numériques s’appuyant sur un modèle stylisé construit à l’aide d’une fonction de production. Le principal résultat est que ces deux chocs peuvent avoir un impact significatif, quoique d’une taille très incertaine. Dans un scénario où le coût réel des prêts aux entreprises reviendrait à sa moyenne sur la période 1991- 2001, le PIB d’équilibre pourrait s’en trouver réduit d’environ 2%, par comparaison à une situation dans laquelle le coût réel du crédit demeurerait au niveau moyen auquel le capital en place à la fin de 2007 fut investi. Si le prix du brut restait voisin de 80 dollars par baril, et par comparaison au prix moyen de 50 dollars qui prévalait lorsque le capital en place en 2007 fut investi, l’impact sur le PIB d’équilibre pourrait être de l’ordre de 1%.

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File URL: http://dx.doi.org/10.1787/5kmbm8030z6h-en
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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 789.

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Date of creation: 01 Jul 2010
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Handle: RePEc:oec:ecoaaa:789-en

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Keywords: potential output; euro area; potential growth; United States; general equilibrium; capital costs; partial equilibrium; financial crisis; interest rates; oil price; oil shock; choc pétrolier; coût du capital; équilibre partiel; taux d'intérêt; potentiel de production; crise financière; équilibre général; prix du pétrole; zone Euro; États-Unis; croissance potentielle;

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