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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

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    More about this item

    Keywords

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

    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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