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Energy Prices and Real Economic Activity in Canada: A Multi-Sector Dynamic General Equilibrium Analysis


  • Yazid Dissou

    () (Department of Economics, University of Ottawa)


As a net exporter of oil, the recent upward trend in the world prices of energy products represents both an opportunity and a challenge for Canada. This study investigates the aggregate and sectoral effects of a sustained increase in these prices on the Canadian economy using a multi-sector forward-looking dynamic general equilibrium model. Counterfactual simulation results suggest that these price shocks would be beneficial to the Canadian economy on an aggregate basis, as real GDP would increase during most periods and households would increase their consumption profile during all periods and would thereby improve their well being. Nevertheless, the price increases would also shift resources toward export booming sectors and would lead to an appreciation of the real exchange rate that would not be beneficial to traditional manufacturing export industries.

Suggested Citation

  • Yazid Dissou, 2007. "Energy Prices and Real Economic Activity in Canada: A Multi-Sector Dynamic General Equilibrium Analysis," Working Papers 0707E, University of Ottawa, Department of Economics.
  • Handle: RePEc:ott:wpaper:0707e

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    References listed on IDEAS

    1. Goulder, Lawrence H. & Parry, Ian W. H. & Williams III, Roberton C. & Burtraw, Dallas, 1999. "The cost-effectiveness of alternative instruments for environmental protection in a second-best setting," Journal of Public Economics, Elsevier, vol. 72(3), pages 329-360, June.
    2. van Wijnbergen, Sweder J G, 1984. "The 'Dutch Disease': A Disease after All?," Economic Journal, Royal Economic Society, vol. 94(373), pages 41-55, March.
    3. Rotemberg, Julio J & Woodford, Michael, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 550-577, November.
    4. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
    5. Leduc, Sylvain & Sill, Keith, 2004. "A quantitative analysis of oil-price shocks, systematic monetary policy, and economic downturns," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 781-808, May.
    6. Radchenko, Stanislav, 2005. "Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases," Energy Economics, Elsevier, vol. 27(5), pages 708-730, September.
    7. Doroodian, K. & Boyd, Roy, 2003. "The linkage between oil price shocks and economic growth with inflation in the presence of technological advances: a CGE model," Energy Policy, Elsevier, vol. 31(10), pages 989-1006, August.
    8. Rebeca Jimenez-Rodriguez & Marcelo Sanchez, 2005. "Oil price shocks and real GDP growth: empirical evidence for some OECD countries," Applied Economics, Taylor & Francis Journals, vol. 37(2), pages 201-228.
    9. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
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    More about this item


    Energy prices; commodity prices; aggregate and sectoral impacts; dynamic general equilibrium modeling; Canada;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-


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