nep-ene New Economics Papers
on Energy Economics
Issue of 2015‒03‒22
38 papers chosen by
Roger Fouquet
London School of Economics

  1. Asymmetric industrial energy prices and international trade By Misato Sato; Antoine Dechezleprêtre
  2. Exploring the Role of Servitization to Overcome Barriers for Innovative Energy Efficiency Technologies – The Case of Public LED Street Lighting in German Municipalities By Friedemann Polzin; Paschen von Flotow; Colin Nolden
  3. The impact of energy prices on energy efficiency: Evidence from the UK refrigerator market By François Cohen; Matthieu Glachant; Magnus Söderberg
  4. Efficiency of electricity use and productivity change of electricity in China: A nonparametric approach By Chow, Sheung Chi; Wenjing, Xu; Xiaoyang, Wu
  5. Posibilităţi de creştere a performanţelor energetice a clădirilor din zona Văii Jiului By Petrilean, Dan Codrut; Codreanu, Iulian; Ilias, Nicolae
  6. Development of the FY2013 Version of "General Energy Statistics of Japan" (Japanese) By KAINOU Kazunari
  7. Die kommunale Kraft-Wärme-Kopplung im Spannungsfeld zwischen Strommarkt und Energiewende: Eine Analyse der Rahmenbedingungen für Stadtwerke zum Ausbau der Kraft-Wärme-Kopplung By Berlo, Kurt; Wagner, Oliver
  8. Estimating the Size of External Effects of Energy Subsidies By Commander, Simon; Nikoloski, Zlatko; Vagliasindi, Maria
  9. Estimating Direct Rebound Effects for Personal Automotive Travel in Great Britain By Lee Stapleton; Steve Sorrell; Tim Schwanen
  10. A Greenfield Model to Evaluate Long-Run Power Storage Requirements for High Shares of Renewables By Alexander Zerrahn; Wolf-Peter Schill
  11. Finance-Growth-Energy Nexus and the Role of Agriculture and Modern Sectors: Evidence from ARDL Bounds Test Approach to Cointegration in Pakistan By Shahbaz, Muhammad; Islam, Faridul; Sabihuddin Butt, Muhammad
  12. Development of Statistical Accuracy Improvement Methodology for Oil Refinery Sector's Energy and Carbon Balance and Statistical Accuracy on Japanese General Energy Statistics (Japanese) By KAINOU Kazunari
  13. Endogenous growth, convexity of damages and climate risk: how Nordhaus� framework supports deep cuts in carbon emissions By Simon Dietz; Nicholas Stern
  15. CO2-emissions from Norwegian oil and gas extraction By Gavenas, Ekaterina; Rosendahl, Knut Einar; Skjerpen, Terje
  16. Does a Clean Development Mechanism Facilitate International Environmental Agreements? By Kai A. Konrad; Marcel Thum
  17. The price vs quantity debate: climate policy and the role of business cycles By Anna Grodecka; Karlygash Kuralbayeva
  18. Financial Development, Environmental Quality, Trade and Economic Growth: What Causes What in MENA Countries By Omri, Anis; Daly, Saida; Rault, Christophe; Chaibi, Anissa
  19. Co-firing in Coal Power Plants and its Impact on Biomass Feedstock Availability By Dumortier, Jerome
  20. Urban development and air pollution: Evidence from a global panel of cities By Christian Hilber; Charles Palmer
  21. An Analysis of Household Electricity Saving Behavior Using the Stochastic Frontier Function By Fumitoshi Mizutani; Eri Nakamura
  22. Luring others into climate action: Coalition formation games with threshold and spillover effects By Valentina Bosetti; Melanie Heugues; Alessandro Tavoni
  23. Effects of Life Cycle Cost Information Disclosure on the Purchase Decision of Hybrid and Plug-In Vehicles By Dumortier, Jerome; Siddiki, Saba; Carley, Sanya; Cisney, Joshua; Krause, Rachel; Lane, Bradley; Rupp, John; Graham, John
  24. Why is geoengineering so tempting? By Baran Doda
  25. What about the OPEC Cartel? By Daniel Huppmann; Franziska Holz
  26. Convenience yields and risk premiums in the EU-ETS - Evidence from the Kyoto commitment period By Stefan Trück; Rafal Weron
  27. Anticipation, tax avoidance, and the price elasticity of gasoline demand By Coglianese, John; Davis, Lucas W.; Kilian, Lutz; Stock, James H.
  28. Carbon emissions embodied in Russia’s trade By Igor A. Makarov; Anna K. Sokolova
  29. Modeling Persistence of Carbon Emission Allowance Prices By Luis A. Gil-Alana; Fernando Perez de Gracia; Rangan Gupta
  30. Alternate solutions in mixing energy tax/subsidy and emission control policies By Shahriar Shah Heydari; Niels Vestergaard
  31. Reciprocal Climate Negotiators By Nyborg, Karine
  32. A Field Experiment on Dynamic Electricity Pricing in Los Alamos:Opt-in Versus Opt-out By Takanori Ida; Wenjie Wang
  33. Transboundary Pollution Abatement: The Impact of Unilateral Commitment in Differential Games By Luisito Bertinelli; Amer Tabakovic; Luca Marchiori; Benteng Zou
  34. Worldwide Evidences in the Relationships between Agriculture, Energy and Water Sectors By Peri, Massimo; Vandone, Daniela; Baldi, Lucia
  35. Production sharing, demand spillovers and CO2 emissions : the case of Chinese regions in GVCs By Pei, Jiansuo; Meng, Bo; Wang, Fei; Xue, Jinjun
  36. Factors driving international technology transfer: Empirical insights from a CDM project survey By Gandenberger, Carsten; Bodenheimer, Miriam; Schleich, Joachim; Orzanna, Robert; Macht, Lioba
  37. Customary International Law and Public Goods By Niels Petersen
  38. Oil price shocks and domestic inflation in Thailand By Jiranyakul, Komain

  1. By: Misato Sato; Antoine Dechezleprêtre
    Abstract: This paper measures the response of bilateral trade flows to differences in industrial energy prices across countries. Using a panel for the period 1996-2011 including 42 countries, 62 sectors and covering 60% of global merchandise trade, we estimate the short-run effects of sector-level energy price asymmetry on trade. We find that changes in relative energy prices have a statistically significant but very small impact on imports. On average, a 10% increase in the energy price difference between two country-sectors increases imports by 0.2%. The impact is larger for energy-intensive sectors. Even in these sectors however, the magnitude of the effect is such that changes in energy price differences across time explain less than 0.01% of the variation in trade flows. Simulations based on our model predict that a €40-65/tCO2 price of carbon in the EU ETS would increase Europe’s imports from the rest of the world by less than 0.05% and decrease exports by 0.2%.
    Date: 2015–01
  2. By: Friedemann Polzin (EBS Business School, Strascheg Institute for Innovation and Entrepreneurship (SIIE), Rheingaustr. 1, 65375 Oestrich-Winkel, Germany); Paschen von Flotow (Sustainable Business Institute (SBI), Zehnthofstr. 1, 65375 Oestrich-Winkel, Germany); Colin Nolden (SPRU, University of Sussex, UK)
    Abstract: In this paper we analyse the case for public application of LED street lighting. Drawing from the energy services literature and transaction cost economics, we compare modes of lighting governance for modernisation. We argue that servitization can accelerate the commercialisation and diffusion of end-use energy demand reduction (EUED) technologies in the public sector if third party energy service companies (ESCo) overcome technological, institutional and economic barriers that accompany the introduction of such technologies resulting in transaction costs. This can only succeed with a supportive policy framework and an environment conducive towards the dissemination of specific technological and commercial knowledge required for the diffusion process
    Keywords: energy efficiency, public policy, servitization, contracting, ESCo, modes of governance, LED, lighting
    Date: 2015–02
  3. By: François Cohen; Matthieu Glachant; Magnus Söderberg
    Abstract: It is commonly believed that large energy efficiency gaps exist in the energy-using durables markets. We develop a broad analytical framework capturing consumer purchase behavior and suppliers’ pricing and innovation decisions to estimate the effect of household electricity price variations on the refrigerator market outcomes. Using UK product-level panel data from 2002 to 2007, we find that the main factor limiting the full effect of rising price signals on curbing energy consumption of refrigerators is not consumer myopia, but changes in relative prices of products in favor of the less efficient models. We also find that manufacturers strongly respond to rising electricity prices by changing their product portfolio. This suggests shifting policy attention towards suppliers’ pricing and innovation behaviors would be effective in achieving energy efficiency gains in the durables market.
    Date: 2015–01
  4. By: Chow, Sheung Chi; Wenjing, Xu; Xiaoyang, Wu
    Abstract: This paper tries to investigate efficiency of electricity use of 30 administration regions and productivity change of electricity in China for the period 2003-2008. We use the Data Envelopment Analysis (DEA) method to measure the efficiency of electricity use and productivity change of electricity. From an empirical perspective, we provide a framework to investigate the situation of relative efficiency of electricity use and the growth rate of electricity’s productivity. The results indicate that the efficiency gap between regions is very large and the east areas have a higher level of electricity efficiency than the western areas. Moreover, both the technical and efficiency change in China from 2003 to 2008 is also slow. Based on these results, we propose some reasons behind and also give some suggestions about it.
    Keywords: Productivity analysis, efficiency of electricity use, productivity change of electricity, Malmquist productivity index, DEA
    JEL: Z0
    Date: 2014–12
  5. By: Petrilean, Dan Codrut; Codreanu, Iulian; Ilias, Nicolae
    Abstract: In the present study explored the effects were obtained for two passive measures: improved thermal insulation and general tightness of the building. Were quantified comparative energy performance for building real reference building, energy efficient building and rehabilitation variants I and II.
    Keywords: building energy efficient, passive measures, comparative energy performance
    JEL: Q40 Q43
    Date: 2013–04–12
  6. By: KAINOU Kazunari
    Abstract: The "General Energy Statistics of Japan" is typical assembled statistics issued by the Agency for Natural Resources and Energy under the Ministry of Economy, Trade and Industry and used as a basic statistics for Energy and Environment policy making area. The current version of the statistics is based on statistical assembling system developed by the author in 2005, but its accuracy is partially degrading especially after the Great East Japan Earthquake that had certain impact on the domestic energy demand and supply structure in Japan.On the other hand, the "Energy Consumption Census" started in 2005 is motivated to identify energy demand and supply structure such as Commercial sector and the government of Japan spends quite a resources for that for these years. But the census just applied conventional statistical agglomeration method proved that such conventional one does not have enough accuracy to improve the "General Energy Statistics" and no way to use the census for that purpose.Here the author developed new version of "General Energy Statistics" from FY1990 to the current fiscal year to solve the problems applying various improvement measure such as re-calculation of energy and carbon balance of oil refinery sector by estimating calorific value and carbon emission factor by oil brands for supply side, and re-agglomeration of the "Energy Consumption Census" using new agglomeration method developed by the author in 2013, replacement of transportation fuel statistic to the new "Automobile Fuel Consumption Census" for demand side and so on.The new version of "General Energy Statistics" is expected to serve as a basic statistics for Energy and Environment policy making as well as the current version. The new version is compatible with mid-class classification of Japan Industrial Classification Standard and successfully achieved streamlining of the industrial classification concept and enhanced resolving power of the statistics maintaining almost equal accuracy with the current version.Forthcoming challenges are as follows; the statistics still requires steady efforts for further improvement of accuracy, strengthening the renewable energy part of the statistics and development of local and regional energy statistics based on the new system. For that purpose, the statistics require continuous cooperation of related organizations and authorities.
    Date: 2015–03
  7. By: Berlo, Kurt; Wagner, Oliver
    Abstract: Dieses Wuppertal Paper befasst sich mit folgenden Leitfragen: Wie wichtig sind Stadtwerke für die Energiewende? Was sind dabei die besonderen Beiträge von Stadtwerken? Hier ist insbesondere zu berücksichtigen, dass kommunal betriebene Kraft-Wärme-Kopplungs-Anlagen (KWK-Anlagen) ein wichtiger Komplementär zum Ausbau der erneuerbaren Energien darstellen und dass kommunale KWK-Anlagen inzwischen einen nennenswerten Beitrag zur Sicherstellung der Residuallast liefern. Zudem geht es um die Leitfrage, welche Rahmenbedingungen die Rolle von Stadtwerken als zentrale Akteure der Energiewende und insbesondere als Betreiber von KWK-Anlagen erschweren. Vor dem Hintergrund der skizzierten Problemlage und der dargestellten Leitfragen behandelt dieses Wuppertal Paper folgende fünf Schwerpunkte: 1. Der komplexe und extrem dynamische Ordnungsrahmen für Stadtwerke zeigt, dass ständige Anpassungen erforderlich sind, um langfristig wirtschaftlich tätig sein zu können. 2. Hier wird die Bedeutung von Stadtwerken für die kommunale Energiewende herausgearbeitet. Der zentralen Zukunftsperspektiven der Energieeffizienz, der dezentralen Kraft-Wärme-Kopplung und erneuerbaren Energien kommt hier eine tragende Rolle zu. Kommunalpolitische Entscheidungsträger nahmen dies zum Anlass, vermehrt Rekommunalisierungen zu betreiben. 3. Die energiewirtschaftliche Bedeutung von Stadtwerken wird dargestellt. Dabei wird auch der dezentralen und demokratisch legitimierten Kontrolle von kommunalen Unternehmen Rechnung getragen. Die Rückbesinnung auf die Gestaltungsmöglichkeiten von kommunaler Energiepolitik hat deutschlandweit zu einem regelrechten Gründungsboom neuer Stadtwerke geführt, weil mit eigenen Unternehmen dem Primat der kommunalen Politik in Energiefragen wieder mehr Geltung verschafft werden kann. Die Motive zur Gründung kommunaler Stadtwerke sind vor allem energie- und klimapolitischer sowie wirtschaftlicher Art. 4. Bislang zu wenig Beachtung wurde der Bedeutung der Kraft-Wärme-Kopplung für den Klimaschutz und das Gelingen der Energiewende geschenkt. Es wird daher in diesem Wuppertal Paper auch gezeigt, dass die KWK als Komplementär erneuerbarer Energien und für die Entwicklung intelligenter Netze ein wichtiger Bestandteil ist. Für Stadtwerke spielen die Aspekte des KWK-Ausbaus und des Lastmanagements zudem eine wichtige wirtschaftliche Perspektive. In einem energiewirtschaftlichen Problemabriss zur Wirtschaftlichkeit der KWK wird zudem die aktuelle Situation im Bereich der Stromerzeugung durch konventionelle Kraftwerke im Allgemeinen und der KWK im Besonderen dargestellt. Dass hier gerade die systemrelevanten modernen Gas(heiz)kraftwerke zu Gunsten von klimaschädlichen Kohlekraftwerken zunehmend vom Netz gehen, stellt hier das Hauptproblem dar. 5. Abschließend wird der bundespolitische Handlungsbedarf formuliert, um dem Stellenwert der KWK im Spannungsfeld zwischen Strommarkt und Energiewende künftig besser gerecht werden zu können. Zur Verdeutlichung einzelner Problemlagen und Handlungsoptionen sollen die an zahlreichen Stellen angeführten Praxisbeispiele einen Beitrag leisten.
    Abstract: This Wuppertal Paper addresses the following questions: How important are municipalities for the energy transition? What are the specific contributions of public utilities? This is especially important to note that local combined heat and power plants (CHP plants) are an important complement to the development of renewable energy sources and that municipal CHP systems now provide a significant contribution to ensuring the residual load. In addition, it comes to the main question, which make it difficult environment, the role of public utilities as key actors in the energy revolution, and especially as the operator of CHP plants. Against the background of the problem outlined above and taking into account of the key questions this Wuppertal Paper covers the following five topics: 1. The complex and extremely dynamic regulatory framework for public utilities shows that constant adjustments are needed in order to be economically active for a long term. 2. Here, the importance of public utilities for municipal energy policy is worked out. The central prospects of energy efficiency, decentralized combined heat and power plants and renewable energy play an important role. On the one hand this is a reason for municipal decisionmakers to increase remunicipalisation and on the other hand provides opportunities for public services to develop new business cases in the energy sector. 3. The energy-economic importance of public utilities is subsequently shown in relation to their decentralized and democratic legitimacy control as a municipal company. The rediscovery of the possibilities of local energy policy in Germany led to a veritable boom in establishing new public utilities. The reason for this is, that policy maker can use their own company to improve the possibilities on energy issues. The motives for the establishment of municipal utilities are primarily energy and climate policy and economic nature. So far, the importance of Cogeneration for climate protection and the success of the energy transition was paid too little attention. Therefore, it is also shown in this Wuppertal Paper that cogeneration play a complementary role with renewable energy and are an important component for the development of intelligent electicity networks. For municipal utilities aspects of the cogeneration expansion and load management also play an important economic perspective. 4. In an energy-economic problem outline of the economics of CHP, the current situation is represented in the field of power generation by conventional power plants in general and the CHP in particular. That the systemically important modern gas (thermal) power plants shall be in favor of environmentally harmful coal power plants increasingly from the network represents the main problem, which leads to the formulation of the nationwide need for political action in the last step. 5. Finally, the deduction of policy recommendations are formulated. In the interplay between the electricity market and the targets of the "German Energiewende" (energy transformation) it needs to be clarified which market structures promote the combined heat and power generation. To clarify individual problems and options for action, there are similar practices in many places.
    Date: 2015
  8. By: Commander, Simon (IE Business School, Altura Partners); Nikoloski, Zlatko (London School of Economics); Vagliasindi, Maria (World Bank)
    Abstract: It is widely accepted that the costs of under-pricing energy are large, whether in advanced or developing countries. This paper explores how large these costs can be by focussing on the size of the external effects that energy subsidies in particular generate in two important sectors – transport and agriculture – in two MENA countries, Egypt (transport) and Yemen (agriculture). Our focus is mainly on the costs associated with congestion and pollution as well the impact of under-priced energy for depletion of scarce water resources including through crop selection. Quantifying the size of external effects in developing countries has received relatively little analytical attention, although there is a significant body of literature for the advanced world. By building on earlier research, as well as employing the UN ForFITS model we are able to provide indicative estimates of the external costs of energy subsidies, as manifested in congestion and pollution. Our estimates using simulations indicate that these costs could be materially reduced by elimination or reduction of energy subsidies. We are also able to describe the impact of energy subsidies on water consumption in a region where water resources are particularly limited. As such, our findings provide further evidence of the adverse and significant consequences of subsidising energy.
    Keywords: energy subsidies, pollution, congestion, health effects of energy subsidies
    JEL: O13 R41 Q41 Q53 I15
    Date: 2015–02
  9. By: Lee Stapleton (Centre on Innovation and Energy Demand and Sussex Energy Group, Science Policy Research Unit, University of Sussex, Falmer, Brighton, BN1 9QE.); Steve Sorrell (Centre on Innovation and Energy Demand and Sussex Energy Group, Science Policy Research Unit, University of Sussex, Falmer, Brighton, BN1 9QE.); Tim Schwanen (Centre on Innovation and Energy Demand, Transport Studies Unit (TSU), School of Geography and the Environment, Oxford University, South Parks Road, oxford, OX1 3QY, United Kingdom)
    Abstract: Direct rebound effects result from increased consumption of cheaper energy services. For example, more fuel-efficient cars encourage more car travel. This study is the first to quantify this effect for personal automotive travel in Great Britain. We use aggregate time-series data on transport activity, fuel consumption and other relevant variables over the period 1970-2011 and estimate the direct rebound effect from the elasticity of vehicle kilometres with respect to: a) vehicle fuel efficiency (km/MJ); b) the fuel cost of driving (£/km); and c) road fuel prices (£/MJ). We estimate a total of 54 models, paying careful attention to methodological issues and model diagnostics. Taking changes in fuel efficiency as the explanatory variable, we find no evidence of a long-run direct rebound effect in Great Britain over this period. However, taking changes in either the fuel cost of driving or fuel prices as the explanatory variable we estimate a direct rebound effect in the range 10% to 27% with a mean of 18%. This estimate is consistent with the results of US studies and suggests that one fifth of the potential fuel savings from improved car fuel efficiency may have been eroded through increased driving. We also show how the normalisation of distance travelled (per capita, per adult or per driver) affects the results obtained
    Keywords: rebound effect; fuel efficiency; robustness; peak car
    Date: 2015–03
  10. By: Alexander Zerrahn; Wolf-Peter Schill
    Abstract: We develop a dispatch and investment model to study the role of power storage and other flexibility options in a greenfield setting with high shares of renewables. The model captures multiple system values of power storage related to arbitrage, dispatchable capacity, and reserves. In a baseline scenario, we find that power storage requirements remain moderate up to a renewable share of around 80%, as other options on both the supply side and demand side also offer flexibility at low cost. Yet storage plays an important role in the provision of reserves. If the renewable share increases to 100%, the required capacities of power storage and other technologies increase strongly. As long-run parameter assumptions are highly uncertain, we carry out a range of sensitivity analyses, for example, with respect to the costs and availabilities of storage and renewables. A common finding of these sensitivities is that – under very high renewable shares – the storage requirement strongly depends on the costs and availability of other flexibility options, particularly on biomass availability. We conclude that power storage becomes an increasingly important element of a transition towards a fully renewable-based power system. Power storage gains further relevance if other potential sources of flexibility are less developed. Supporting the development of power storage should thus be considered a useful component of policies designed to safeguard the transition towards renewables.
    Keywords: Power storage, flexibility options, renewable energy, energy transition
    JEL: Q42 Q47 Q48
    Date: 2015
  11. By: Shahbaz, Muhammad; Islam, Faridul; Sabihuddin Butt, Muhammad
    Abstract: This paper explores the relationship between financial development and energy consumption by incorporating economic growth, agriculture and modern sectors in Pakistan over the period of 1972-2011. The Autoregressive Distributive Lag (ARDL) bounds testing approach to cointegration, assuming structural breaks, confirms cointegration. Innovation accounting approach, used to examine the direction of causality, shows that economic growth causes energy demand. We also fine bidirectional causality between financial development and energy consumption; and between modern sector growth and energy consumption. Energy consumption Granger causes agriculture growth. The results offer valuable insights for policymakers in crafting appropriate energy policy for Pakistan.
    Keywords: Energy Consumption, Economic Growth, Financial Development, Pakistan
    JEL: E00
    Date: 2015–03–02
  12. By: KAINOU Kazunari
    Abstract: Current Japanese General Energy Statistics quantifies energy and carbon balance of oil refinery sector solely by input such as crude oil and output such as gasoline, and regards the discrepancy as a statistical error and does not count energy consumption or energy origin carbon dioxide emission for the discrepancy.But issues are raised by a related committee of Ministry of the Environment that some part of the discrepancy of oil refinery sector might contain energy consumption and energy origin carbon dioxide emission such as oil coke incineration emission associated with fluid-bed cracking catalyzer refreshment in the heavy oil dissolving processes. So, further statistical accuracy improvement for oil refinery sector's energy and carbon balance had been required.The author developed new methodology to identify the part that is estimated as an energy consumption and carbon dioxide emission such as fluid-bed cracking catalyzer and another part that is estimated as a statistical error from current discrepancy in this paper, by quantifying precise energy and carbon balance of oil refinery sector in the past, based on various related official statistics and using new calorific value and carbon emission factor that would be applied after FY2013 statistics and other brand new available information.Based on the results, the author recommends that energy consumption and energy origin carbon dioxide emissions such as oil coke incineration emission associated with fluid-bed cracking catalyzer refreshment in the heavy oil dissolving processes should be quantified and reported using the methodology and improve oil refinery sector's energy and carbon balance statistical accuracy.
    Date: 2015–03
  13. By: Simon Dietz; Nicholas Stern
    Abstract: To slow or not to slow� (Nordhaus, 1991) was the first economic appraisal of greenhouse gas emissions abatement and founded a large literature on a topic of great, worldwide importance. In this paper we offer our assessment of the original article and trace its legacy, in particular Nordhaus� later series of �DICE� models. From this work many have drawn the conclusion that an efficient global emissions abatement policy comprises modest and modestly increasing controls. On the contrary, we use DICE itself to provide an initial illustration that, if the analysis is extended to take more strongly into account three essential elements of the climate problem � the endogeneity of growth, the convexity of damages, and climate risk � optimal policy comprises strong controls. To focus on these features and facilitate comparison with Nordhaus� work, all of the analysis is conducted with a high pure-time discount rate, notwithstanding its problematic ethical foundations.
    Date: 2014–05
  14. By: Francesco Bogliacino.; Matteo Lucchesex
    Abstract: In this article we use the unification of Germany in 1990 to test the hypothesis that an increase in the supply of a production factor generates skill biased technical change. We test for this mechanism in the context of the model presented by Acemoglu and Autor (2011) that allows endogenous assignment of skills to tasks in the economy. We use cohorts of workers from comparable countries as a control group. After discussing the possible confounding factors, we conclude that this effect is absent. The differential pattern among the countries seems to be determined by labor market flexibilization and tax reform.
    Keywords: Skill Biased Technological Change, Polarization, Natural Experiment.
    JEL: J31 O33 O52
    Date: 2015–03–06
  15. By: Gavenas, Ekaterina (School of Economics and Business, Norwegian University of Life Sciences); Rosendahl, Knut Einar (School of Economics and Business, Norwegian University of Life Sciences); Skjerpen, Terje (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: Emissions from oil and gas extraction matter for the lifecycle emissions of fossil fuels, and account for significant shares of domestic emissions in many fossil fuel exporting countries. In this study we investigate empirically the driving forces behind CO2-emission intensities of Norwegian oil and gas extraction, using detailed field-specific data that cover all Norwegian oil and gas activity. We find that emissions per unit extraction increase significantly as a field’s extraction declines. Moreover, emission intensities increase significantly with a field’s share of oil in total oil and gas reserves. We also find some indication that oil and CO2-prices may have influenced emission intensities on the Norwegian continental shelf.
    Keywords: CO2-emissions; Oil and gas extraction; Panel data estimation
    JEL: C23 L71 Q54
    Date: 2015–03–17
  16. By: Kai A. Konrad; Marcel Thum
    Abstract: When politicians negotiate in international climate conventions they may suffer from incomplete information about each other's preferences about reaching an agreement. As is known, this may cause failure to reach an efficient cooperative agreement. We study the role of the clean development mechanism (CDM) for the likelihood of such failure. The CDM has been introduced in the context of the Kyoto Protokol to allow countries to make efficiency enhancing use of cross-country low-cost mitigation opportunities. We use a simple bargaining framework to uncover why this mechanism may reduce the likelihood for reaching an efficient cooperative climate agreement.
    Keywords: clean development mechanism, international climate agreements, bargaining, incomplete information
    JEL: Q54 Q58 F53 H41
    Date: 2014–11
  17. By: Anna Grodecka; Karlygash Kuralbayeva
    Abstract: What is the optimal instrument design and choice for a regulator attempting to control emissions by private agents in face of uncertainty arising from business cycles? In applying Weitzman’s result [Prices vs. quantities, Review of Economic Studies, 41 (1974), 477-491] to the problem of greenhouse gas emissions, the price-quantity literature has shown that, under uncertainty about abatement costs, price instruments (carbon taxes) are preferred to quantity restrictions (caps on emission), since the damages from climate change are relatively flat. On the other hand, another recent piece of academic literature has highlighted the importance of adjusting carbon taxes to business cycle fluctuations in a procyclical manner. In this paper, we analyze the optimal design and the relative performance of price versus quantity instruments in the face of uncertainty stemming from business cycles. Our theoretical framework is a general equilibrium real business cycle model with a climate change externality and distortionary fiscal policy. First, we find that in an infinitely flexible control environment, the carbon tax fluctuates very little and is approximately constant, whilst emissions fluctuate a great deal in response to a productivity shock. Second, we find that a fixed price instrument is advantageous over a fixed quantity instrument due to the cyclical behavior of abatement costs, which tend to increase during expansions and decline during economic downturns. Our results suggest that the carbon tax is approximately constant over business cycles due to “flat” damages in the short-run and thus procyclical behavior as suggested by other studies cannot be justified merely on the grounds of targeting the climate externality.
    Date: 2015–01
  18. By: Omri, Anis (University of Sfax); Daly, Saida (University of Sfax); Rault, Christophe (University of Orléans); Chaibi, Anissa (IPAG Business School)
    Abstract: This paper examines the relationship between financial development, CO2 emissions, trade and economic growth using simultaneous-equation panel data models for a panel of 12 MENA countries over the period 1990-2011. Our results indicate that there is evidence of bidirectional causality between CO2 emissions and economic growth. Economic growth and trade openness are interrelated i.e. bidirectional causality. Feedback hypothesis is validated between trade openness and financial development. Neutrality hypothesis is identified between CO2 emissions and financial development. Unidirectional causality running from financial development to economic growth and from trade openness to CO2 emissions is identified. Our empirical results also verified the existence of environmental Kuznets curve. These empirical insights are of particular interest to policymakers as they help build sound economic policies to sustain economic development and to improve the environmental quality.
    Keywords: financial development, CO2 emissions, trade, economic growth, simultaneous-equation models
    JEL: E44 E58 F36 P26
    Date: 2015–02
  19. By: Dumortier, Jerome
    Abstract: Several states have a renewable portfolio standard (RPS) and allow for biomass co-firing to meet the RPS requirements. In addition, a federal renewable fuel standard (RFS) mandates an increase in cellulosic ethanol production over the next decade. This paper quantifies the effects on local biomass supply and demand of different co-firing policies imposed on 398 existing coal-fired power plants. Our model indicates which counties are most likely to be able to sustain cellulosic ethanol plants in addition to co-firing electric utilities. The simulation incorporates the county-level biomass market of corn stover, wheat straw, switchgrass, and forest residues as well as endogenous crop prices. Our scenarios indicate that there is sufficient feedstock availability in Southern Minnesota, Iowa, and Central Illinois. Significant supply shortages are observed in Eastern Ohio, Western Pennsylvania, and the tri-state area of Illinois, Indiana, and Kentucky which are characterized by a high density of coal-fired power plants with high energy output.
    Keywords: switchgrass, miscanthus, land-use change, Environmental Economics and Policy, Land Economics/Use, Resource /Energy Economics and Policy,
    Date: 2015
  20. By: Christian Hilber; Charles Palmer
    Abstract: Study examines air pollution concentration in 75 urban areas between 2005 and 2011. Focuses specifically on the impacts of changes in the urban environment and transportation mode on pollution. A surprising finding of the research is that increasing car and population densities significantly reduce air pollution concentration in city centers where air pollution induced health risks are greatest. These effects are largely confined to cities in non-OECD countries. Two possible mechanisms for the negative effect of car density are explored: (i) increasing car density permits a decentralization of residential and economic activity; and (ii) car usage substitutes for motorbike usage. We find limited evidence in favour of (i) and no evidence in favour of (ii). We also observe a complex relationship between income and pollution concentration as well as a general downward-trend in pollution concentration over time. Overall, our findings are indicative that densely populated polycentric cities may be ‘greener’ and ‘healthier’ than comparable monocentric ones.
    Date: 2014–12
  21. By: Fumitoshi Mizutani (Graduate School of Business Administration, Kobe University); Eri Nakamura (Graduate School of Business Administration, Kobe University)
    Abstract: The main purpose of this study is to investigate the difference between incentive effects and physical condition effects in electricity saving behaviors of households, by applying stochastic frontier models for the demand function. As for incentives, we consider both internal incentives such as environmental consciousness, and external incentives such as the price system and information feedback. This paper makes three contributions to the existing literature. First, we consider the difference in room for saving electricity among households by labeling in this paper the amount of electricity consumption which is possible to be reduced for energy saving as “consumption slack†(i.e. incentive effects), which we separate from the minimum necessary amount of consumption impossible to be reduced for energy saving (i.e. physical condition effects). Our second contribution is that we take the novel approach of using the stochastic frontier model to distinguish the reducible amount from the minimum necessary amount of electricity consumed among households. Last, we empirically examine which of the internal or external incentives are more effective in reducing household electricity consumption. Using data on 561 Japanese households in 2012, we obtain the following results. Consciousness of consumption is more important to electricity saving than external incentives such as demand response and information feedback. Without such consciousness, demand response alone increases consumption slack. Conversely, demand response can reduce consumption slack when combined with a household’s conscious saving. Other findings indicate that in evaluating saving performance, it is necessary to refer to consumption slack rather than to households’ self-evaluation or the observed total amount of consumption.
    Keywords: Energy saving; Electricity; Stochastic frontier model; Demand response; Consumer behavior
    JEL: D1 M2 L9 Q4
    Date: 2015–03
  22. By: Valentina Bosetti; Melanie Heugues; Alessandro Tavoni
    Abstract: Cooperation between countries is required to overcome major societal problems, such as climate change. However, rational logic dictates that individual countries are incentivised not to act, instead preferring to ‘free ride’ on the efforts of others. It is possible to imagine a scenario in which all countries wait for each other to show leadership, resulting in an irreversible catastrophe. Successful climate change mitigation therefore hinges on some actors leading by example. Those countries will have to push temporarily individual incentives aside in favour of the long-term greater good. This paper uses game theory to find out how countries can work together to mitigate against climate change. The ‘threshold public bad game’ described in this paper was designed to capture the trade-offs faced by countries choosing whether to transition to clean technology, and to what extent. The game accounts for the fact that the degree to which a country commits to clean technology will dictate whether countries collectively manage to avert dangerous climate change or not. The game also features innovation ‘spillovers’.
    Date: 2015–01
  23. By: Dumortier, Jerome; Siddiki, Saba; Carley, Sanya; Cisney, Joshua; Krause, Rachel; Lane, Bradley; Rupp, John; Graham, John
    Abstract: Energy-saving technologies have a difficult time being widely accepted and consumed in the marketplace when they have a high initial purchase price and deferred financial benefits. Consumers might not realize that, in the long-run, the financial benefits from reduced energy consumption offset much or all of the initial price premium. One strategy to address consumer misconception of this advantage is to supply information on the "total cost of ownership," a metric which accounts for the purchase price, the cost of the fuel, and other costs over the ownership period. In this article, we investigate how providing information on five-year fuel cost savings and total cost of ownership affects the stated preferences of consumers to purchase a gasoline, hybrid, plug-in hybrid, or battery electric vehicle. Through an online survey with an embedded experimental design using two distinct labels, we find that respondent rankings of vehicles are unaffected by information on five-year fuel cost savings only. However, adding information about total cost of ownership increases the probability that small/mid-sized car consumers express a preference to acquire a hybrid, plugin hybrid, or a battery-electric vehicle. No such effect is found for consumers of small sport utility vehicles. Our results are consistent with other findings in similar behavioral economics investigations on this topic and suggest that further evaluation of the effects of providing consumers with information on the total cost of ownership is warranted.
    Keywords: Rank-ordered logit, battery electric vehicles, life cycle cost, label information, Environmental Economics and Policy, Institutional and Behavioral Economics,
    Date: 2015
  24. By: Baran Doda
    Abstract: Geoengineering can be defined as the technologies that aim to deliberately alter geophysical mechanisms in order to alleviate the impacts of climate change. It has received increasing attention by economists and the public but remains deeply controversial. This paper studies the potential benefits from geoengineering in a standard one-sector growth model augmented with a carbon cycle and a climate system. These benefits can be interpreted as a lower bound for the direct and indirect costs which would make geoengineering less preferable to abatement. In the planner’s solution to the model, exogenous geoengineering in the future increases investment in physical capital and reduces abatement, both today and in the future. The central result of the paper is that the direct and indirect costs of geoengineering must be large for geoengineering not to be tempting. Nevertheless, substantial abatement is optimal even when geoengineering does not entail any costs. A sensitivity analysis establishes how the results change in a world with a lower initial capital stock; an earlier availability of geoengineering; and under different parameter values for the discount rate and the curvature of the damage function. Together these results show how the temptation to use geoengineering can be different for developing and advanced countries.
    Date: 2014–10
  25. By: Daniel Huppmann; Franziska Holz
    Abstract: The recent decision by the Organization of the Petroleum Exporting Countries (OPEC) not to decrease their output quota in spite of a drastic decline of crude oil prices has brought renewed attention to this supplier group dominating the crude oil market. However, the empirical evidence that OPEC truly acts as a textbook cartel is rather limited. This Roundup summarizes the theories proposed over the past decades to explain the fundamental structure of the crude oil market and the role of OPEC and Saudi Arabia, the pivotal supplier. The consensus in the academic literature points towards the interpretation that the group is acting as a non-cooperative oligopoly. We relate the theories to alternative interpretations of the price drop over the autumn of 2014.
    Date: 2015
  26. By: Stefan Trück; Rafal Weron
    Abstract: We examine convenience yields in the EU-wide CO2 emissions trading scheme (EU-ETS) during the first Kyoto commitment period (2008-2012). We find that the market has changed from initial backwardation to contango with significantly negative convenience yields in futures contracts. We further examine the impact of interest rate levels in the Eurozone, the increasing level of surplus allowances and banking as well as returns, variance or skewness in the EU-ETS spot market. Our findings suggest that the drop in risk-free rates during and after the financial crisis has impacted on the deviation from the cost-of-carry relationship for Kyoto commitment emission allowances (EUA) futures contracts. Our results also illustrate a negative relationship between convenience yields and the increasing level of inventory during the first Kyoto commitment period providing an explanation for the high negative convenience yields during Phase II. Finally, we find that market participants are willing to pay an additional risk premium in the futures market for a hedge against increased volatility in EUA prices.
    Keywords: CO2 Emissions Trading; Commodity Markets; Spot and Futures Prices; Convenience Yields;
    JEL: G10 G13 Q21 Q28
    Date: 2015
  27. By: Coglianese, John; Davis, Lucas W.; Kilian, Lutz; Stock, James H.
    Abstract: Traditional least squares estimates of the responsiveness of gasoline consumption to changes in gasoline prices are biased toward zero, given the endogeneity of gasoline prices. A seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes, but this approach tends to yield implausibly large price elasticities. We demonstrate that anticipatory behavior provides an important explanation for this result. We provide evidence that gasoline buyers increase gasoline purchases before tax increases and delay gasoline purchases before tax decreases. This intertemporal substitution renders the tax instrument endogenous, invalidating conventional IV analysis. We show that including suitable leads and lags in the regression restores the validity of the IV estimator, resulting in much lower and more plausible elasticity estimates. Our analysis has implications more broadly for the IV analysis of markets in which buyers may store purchases for future consumption.
    Date: 2015
  28. By: Igor A. Makarov; Anna K. Sokolova
    Abstract: According to current international climate change regime countries are responsible for greenhouse gas (GHG) emissions, which result from economic activities within national borders, including emissions from producing goods for exports. At the same time imports of carbon intensive goods are not regulated by international agreements. In this paper emissions embodied in exports and imports of Russia were calculated with the use of inter-country input-output tables. It was revealed that Russia is the second largest exporter of emissions embodied in trade and the large portion of these emissions is directed to developed countries. The reasons for high carbon intensity of Russia’s exports are obsolete technologies (in comparison to developed economies) and the structure of commodity exports. Because of large amount of net exports of carbon intensive goods the current approach to emissions accounting does not suit interests of Russia. On the one hand, Russia, as well as other large net emissions exporters, is interested in the revision of allocation of responsibility between producers and consumers of carbon intensive products. On the other hand, current technological backwardness makes Russia vulnerable to the policy of “carbon protectionism”, which can be implemented by its trade partners.
    Keywords: global climate change, carbon emissions, virtual carbon, carbon intensity of trade, Russia’s trade, input-output analysis, Kyoto protocol
    JEL: F18
    Date: 2015–03
  29. By: Luis A. Gil-Alana (Faculty of Economics and NCID, University of Navarra, Spain); Fernando Perez de Gracia (Faculty of Economics and NCID, University of Navarra, Spain); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This study reexamines the issue of persistence in carbon emission allowance spot prices, using daily data, and covering the period from 28/2/2007 to 14/05/2014. For this purpose we use techniques based on the concept of long memory accounting for structural breaks and non-linearities in the data, with both of these aspects potentially affecting the degree of persistence. Our results indicate that, while there is no evidence of non-linearity, when allowing for structural breaks, persistence of shocks to the carbon emission allowance is markedly reduced, with the same being transitory in nature for recent sub-samples.
    Keywords: CO2 emission allowance prices, fractional integration, nonstationarity
    JEL: C22 G13 G14 Q50
    Date: 2015–03
  30. By: Shahriar Shah Heydari (Department of Environmental and Business Economics, University of Southern Denmark); Niels Vestergaard (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: In this article, we look at the combination of several market-based climate and energy policies and compare them with first best solution, i.e., a perfectly designed emission tax or emission cap level. It is shown that in the case an emission control policy is imperfect designed or implemented, its per-formance can be improved by an energy (output) tax/subsidy scheme, where the subsidy is given only to renewable generators or for energy efficiency improvements. This combination can bring the production levels and energy price to the optimum level. The emission level is also decreased by this combination, but not to the optimum level. Thus it may be considered as a second-best policy set. However, other targets on renewables share or energy efficiency level are improved instead, although they are bounded by an optimum level. The policy combination needs to be applied glob-ally to have its best effect and heterogeneous implementation (i.e. different levels of tax/subsidy for various regions) makes welfare loss, but still adding a global emission control policy to a set of ex-isting different local output tax/subsidy policies may be beneficial.
    Keywords: Climate change mitigation, environmental policy, instrument mixes, economic ef-ficiency, environmental taxes and subsidies
    JEL: C61 D60 H21 H23 Q41 Q48
    Date: 2015–03
  31. By: Nyborg, Karine (University of Oslo)
    Abstract: International climate negotiations have been troubled by mutual mistrust. At the same time, a hope seems to prevail that once enough countries moved forward, others would follow suit. If the abatement game faced by climate negotiators is a Prisoners' Dilemma, and countries are narrowly self-interested, such a hope seems unfounded. However, if countries display reciprocity – a preference to repay meanness by meanness and kindness by kindness – their willingness to abate will be conditional on others' abatement. I show that a full or majority coalition can be stable. This requires, however, that a majority of countries have relatively strong reciprocity preferences. No coalition participation is always stable. In addition, a stable minority coalition may exist; if so, it is weakly larger than the maximum stable coalition with standard preferences, but is characterized by mutually negative sentiments.
    Keywords: international environmental agreements, reciprocity, coalitions
    JEL: F53 H87 Q54
    Date: 2015–02
  32. By: Takanori Ida; Wenjie Wang
    Abstract: We use a field experiment to examine how consumers respond to distinct combinations of default options (opt-in versus opt-out) and framing of economic incentives (gain versus loss). A randomized controlled trial (RCT) is implemented to investigate the demand reduction performance of three dynamic electricity pricing programs - opt-in critical peak pricing (CPP, incentive framed as loss), opt-out CPP, and opt-out peak time rebate (PTR, incentive framed as gain). We find that the opt-in customer enrollment rate is much higher than those documented in the literature are; our subjects’ high education levels and technology related experiences may have contributed largely to the mitigation of the opt-in default effect. In addition, we obtain precise estimates of the average treatment effects, with the treatment effect being most pronounced for customers assigned to the opt-in CPP group. This result is largely attributable to the high opt-in CPP enrollment rate and to the customer inertia generated by opt-out procedures. Furthermore, an “option to quit” effect is found among PTR customers. This finding is consistent with a growing behavioral literature highlighting that incentives framed as losses loom larger than those framed as gains.
    Keywords: Field Experiment, Behavioral Economics, Framing, Default Effect, Dynamic Elec- tricity Pricing.
    JEL: C23 C93 D03 Q41
    Date: 2014–09
  33. By: Luisito Bertinelli (CREA, Université de Luxembourg); Amer Tabakovic (CREA, Université de Luxembourg); Luca Marchiori (Central Bank of Luxembourg); Benteng Zou (CREA, Université de Luxembourg)
    Abstract: The present study explores the strategic interactions of countries setting pollution abatement policies in a dynamic two-player game. To reach a common target of environmental quality, countries can choose to commit to a stream of pollution abate- ment right from the beginning of the game or decide upon abatement at each moment in time. Most of the literature studies homogenous strategies, where no country or all countries commit to a (same) predefined policy. The main novelty of this paper resides in the introduction of heterogeneous strategies, where only one country commits to a specific abatement policy and which is actually the kind of strategic behavior currently observed among large pollution nations. We find that the pollution level can be lower under heterogeneous than under homogenous strategies. A stringent environmental quality target will induce the committed player to produce an abatement effort that more than compensates the free-riding attitude of the non-committed player.
    Keywords: Heterogeneous strategies, differential games, transboundary pollution, abatement.
    JEL: Q55 C61 Q59
    Date: 2015
  34. By: Peri, Massimo; Vandone, Daniela; Baldi, Lucia
    Abstract: Water, food and energy (WFE) are strongly interconnected: each depends on the other for a lot of concerns, spanning from guaranteeing access to services, to environmental, social and ethical impact issues, to price relations. The development, use, and waste generated by demand for these resources drive global changes and fears of resource scarcity. To date, a new approach to the concept of sustainable development is emerging and a joint analysis of these three areas is needed. “Demand for water, food and energy is expected to rise by 30-50% in the next two decades, while economic disparities incentivize short-term responses in production and consumption that undermine long-term sustainability. Shortages could cause social and political instability, geopolitical conflict and irreparable environmental damages. Any strategy that focuses on one part of the WFE relationships without considering its interconnections risks serious unintended consequences” (World Economic Forum, 2011).
    Keywords: Agribusiness, Agricultural and Food Policy,
    Date: 2014–10
  35. By: Pei, Jiansuo; Meng, Bo; Wang, Fei; Xue, Jinjun
    Abstract: This study adopts the perspective of demand spillovers to provide new insights regarding Chinese domestic-regions' production position in global value chains and their associated CO2 emissions. To this end, we constructed a new type of World Input-Output Database in which China's domestic interregional input-output table for 2007 is endogenously embedded. Then, the pattern of China's regional demand spillovers across both domestic regions and countries are revealed by employing this new database. These results were further connected to endowments theory, which help to make sense of the empirical results. It is found that China's regions locate relatively upstream in GVCs, and had CO2 emissions in net exports, which were entirely predicted by the environmental extended HOV model. Our study points to micro policy instruments to combat climate change, for example, the tax reform for energy inputs that helps to change the production pattern thus has impact on trade pattern and so forth.
    Keywords: China, International trade, Input-output tables, Environmental protection, Climatic change, Taxation, Energy tax, Carbon tax, Climate change, CGE model, Energy intensive industry
    JEL: C65 Q56 R15
    Date: 2015–02
  36. By: Gandenberger, Carsten; Bodenheimer, Miriam; Schleich, Joachim; Orzanna, Robert; Macht, Lioba
    Abstract: This study employs an original survey-based dataset to explore technology transfer in CDM projects. The findings suggest that about two-thirds of the CDM projects involve a medium to very high extent of technology transfer. The econometric analysis distinguishes between knowledge and equipment transfer and specifically allows for the influence of technological characteristics, such as novelty and complexity of a technology, as well as the use of different transfer channels. More complex technologies and the use of export as a transfer channel are found to be associated with a higher degree of technology transfer. Projects involving 2- to 5-year-old technologies seem more likely to involve technology transfer than both younger and older technologies. Energy supply and efficiency projects are correlated with a higher degree of technology transfer than non-energy projects. Unlike previous studies, our analysis did not find technology transfer to be related to project size, the length of time a country has hosted CDM projects or the host country' s absorptive capacity. Our findings are similar for knowledge and equipment transfer. CDM projects are often seen as a vehicle for the transfer of climate technologies from industrialized to developing countries. Thus, a better understanding of the factors driving technology transfer in these projects may help policy makers design policies that better foster the transfer of knowledge and equipment, in addition to lowering greenhouse gas emissions. This may be achieved by including more stringent requirements with regard to international technology transfer in countries' CDM project approval processes. Based on our findings, such policies should focus particularly on energy supply and efficiency technologies. Likewise, it may be beneficial for host countries to condition project approval on the novelty and complexity of technologies and adjust these provisions over time. Since such technological characteristics are not captured systematically by PDDs, using a survey-based evaluation opens up new opportunities for a more holistic and targeted evaluation of technology transfer in CDM projects.
    Keywords: Clean Development Mechanism,Technology Transfer,North-South,Energy Technology,Development and Climate
    Date: 2015
  37. By: Niels Petersen (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: The paper examines the potential of customary international law to protect global public goods. In particular, it focuses on the question whether customary law can contribute to the mitigation of climate change. The analysis proceeds in the three steps. First, it will have a closer look at the concept of public goods and common pool resources in economic theory and experimental economics. On this basis, the second section examines the formation of customary international law. The analysis shows that sustaining cooperation in multilateral settings through customary law is difficult. With regard to the mitigation of climate change, it is unlikely that states will coordinate on an equilibrium that will lead to a reduction of greenhouse gas emissions. The section then examines two further ways of identifying customary international law through moral interpretation and judicial lawmaking. However, the potential of these two avenues to protect global public goods effectively is rather limited. The final section analyzes the protection of global public goods through the initially unilateral extension of authority. One problem of global public goods is that states have shared authority over them. A solution might be to divide authority by extending the jurisdiction of the nation states. I will draw from an example concerning the protection of common pool resources, the protection of fish stocks, and analyze whether this example contains any lessons for the mitigation of climate change.
    JEL: K33
    Date: 2015–02
  38. By: Jiranyakul, Komain
    Abstract: This paper employ monthly data to examine the empirical relationship between oil price shocks and domestic inflation rate during 1993 and 2013. The results show that oil price, domestic or international, does not have the long-run impact on consumer prices. However, oil price shocks cause inflation to increase while oil price uncertainty does not cause an increase in inflation. Furthermore, inflation itself causes inflation uncertainty. The findings of this study encourage the monetary authorities to formulate a more accommodative policy to respond to oil price shocks.
    Keywords: Oil shocks, inflation, bivariate GARCH, causality
    JEL: E31 Q43
    Date: 2015–03

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