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On the removal of energy products subsidies in an importing oil country: impacts on prices in Morocco

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  • Bentour, El Mostafa

Abstract

Using input-output models, we analyze the effect of removing subsidized oil products in Morocco. We set three scenarios of increasing oil products by 25%, 50% and 75%, and symmetric decreases by the same amounts. We show that the effects are high in intensive oil products sectors such as transports and electricity and water sectors. Using the weights of the sectors, we deduce the overall inflation generated by direct and indirect requirements for the total economy. For example, an increase in oil prices by 75% generates a global inflation cost between 5.5% and 8%. Symmetric scenarios indicate no strong asymmetrical effects. The generated inflation may alter the stable path of inflation recorded over the past fifteen years putting pressure on the monetary authorities. Therefore, the change of strategy from managed exchange rate regime towards a flexible regime, extensively discussed, is now an urgent necessity.

Suggested Citation

  • Bentour, El Mostafa, 2015. "On the removal of energy products subsidies in an importing oil country: impacts on prices in Morocco," MPRA Paper 63635, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:63635
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    References listed on IDEAS

    as
    1. Nathan Perry & Nathaniel Cline, 2013. "Wages, Exchange Rates, and the Great Inflation Moderation: A Post-Keynesian View," Economics Working Paper Archive wp_759, Levy Economics Institute.
    2. Kristoufek, Ladislav & Lunackova, Petra, 2015. "Rockets and feathers meet Joseph: Reinvestigating the oil–gasoline asymmetry on the international markets," Energy Economics, Elsevier, vol. 49(C), pages 1-8.
    3. José De Gregorio, 2012. "Commodity Prices, Monetary Policy, and Inflation†," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(4), pages 600-633, December.
    4. Carlo A Sdralevich & Randa Sab & Younes Zouhar & Giorgia Albertin, 2014. "Subsidy Reform in the Middle East and North Africa; Recent Progress and Challenges Ahead," IMF Departmental Papers / Policy Papers 14/08, International Monetary Fund.
    5. Rahul Anand & David Coady & Adil Mohommad & Vimal V Thakoor & James P Walsh, 2013. "The Fiscal and Welfare Impacts of Reforming Fuel Subsidies in India," IMF Working Papers 13/128, International Monetary Fund.
    6. Arze del Granado, Francisco Javier & Coady, David & Gillingham, Robert, 2012. "The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries," World Development, Elsevier, vol. 40(11), pages 2234-2248.
    7. José de Gregorio, 2012. "Commodity Prices, Monetary Policy and Inflation," Working Papers wp359, University of Chile, Department of Economics.
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    10. Rédouane Taouil, 2010. "La trilogie impossible de la stabilité macro-économique au Maroc," Revue Tiers-Monde, Armand Colin, vol. 0(2), pages 131-148.
    11. Plante, Michael, 2014. "The long-run macroeconomic impacts of fuel subsidies," Journal of Development Economics, Elsevier, vol. 107(C), pages 129-143.
    12. Verme, Paolo & El-Massnaoui, Khalid & Araar, Abdelkrim, 2014. "Reforming Subsidies in Morocco," World Bank - Economic Premise, The World Bank, issue 134, pages 1-5, February.
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    More about this item

    Keywords

    Energy Reform; Fiscal Policy; Inflation; Input-Output Models; Asymmetric Effects; Morocco.;

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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