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

Listed author(s):
  • 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.

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File URL: http://sciencessociales.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/0707E.pdf
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Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 0707E.

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Length: 29 pages
Date of creation: 2007
Handle: RePEc:ott:wpaper:0707e
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Web page: http://www.socialsciences.uottawa.ca/eco/eng/index.asp
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  1. Burtraw, Dallas & Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," Discussion Papers dp-98-22, Resources For the Future.
  2. 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.
  3. 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.
  4. Julio J. Rotemberg & Michael Woodford, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," NBER Working Papers 5634, National Bureau of Economic Research, Inc.
  5. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
  6. 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.
  7. 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.
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