nep-ene New Economics Papers
on Energy Economics
Issue of 2017‒06‒25
33 papers chosen by
Roger Fouquet
London School of Economics

  1. Intermittent renewable electricity generation with smart grids By Prudence Dato; Tun Durmaz; Aude Pommeret
  2. The Economic Cost of Carbon Abatement with Renewable Energy Policies By Jan Abrell; Mirjam Kosch; Sebastian Rausch
  3. [WTO Case Review Series No. 18] India—Certain Measures Relating to Solar Cells and Solar Modules (WT/DS456): Developing Interpretation regarding government procurement, Articles XX(d) and XX(j) of the GATT (Japanese) By SEKINE Takemasa
  4. Do Battery-Switching Systems Accelerate the Adoption of Electric Vehicles? A Stated Preference Study By Nobuyuki Ito; Kenji Takeuchi; Shunsuke Managi
  5. Does Strategic Ability Affect Efficiency? Evidence from Electricity Markets By Ali Hortaçsu; Fernando Luco; Steven L. Puller; Dongni Zhu
  6. Switching Behavior and the Liberalization of the Italian Electricity Retail Market. Logistic and Mixed Effect Bayesian Estimations of Consumer Choice. By Fontana, Magda; Iori, Martina; Nava, Consuelo Rubina
  7. Adoption and Diffusion of Micro-Grids in Italy. An Analysis of Regional Factors Using Agent-Based Modelling By Francesco Pasimeni
  8. Stop-loss and Leverage in optimal Statistical Arbitrage with an application to Energy market By Roberto Baviera; Tommaso Santagostino Baldi
  9. The impact of energy prices on product innovation: Evidence from the UK refrigerator market. By François Cohen; Matthieu Glachant; Magnus Söderberg
  10. What Do People 'Learn By Looking' at Direct Feedback on their Energy Consumption? Results of a Field Study in Southern France By Adnane Kendel; Nathalie Lazaric; Kevin Maréchal
  11. Recent Topical Research on Global, Energy, Health & Medical, and Tourism Economics, and Global Software By Chia-Lin Chang; Michael McAleer
  12. Energia, pobreza y Objetivos de Desarrollo Sostenibles By Hannah Goozee
  13. The impacts of joint energy and output prices uncertainties in a mean-variance framework By Alghalith, Moawia; Niu, Cuizhen; Wong, Wing-Keung
  14. Russian oil and gas sector in 2016 By Bobylev Yuri
  15. Resource Discovery and the Political Fortunes of National Leaders By Sambit Bhattacharyya; Michael Keller; Rabah Arezki
  16. Fiscal- Monetary Interdependence and Exchange Rate Regimes in Oil Dependent Arab Economies By Ibrahim Elbadawi; Mohamed Goaied; Moez Ben Tahar
  17. An Econometric Analysis of Energy Revenue and Government Expenditure Shocks on Economic Growth in Trinidad and Tobago By Jeetendra Khadan
  18. Public Investment Scaling-up and Debt Sustainability; The Case of Energy Sector Investments in the Caribbean By Ahmed El-Ashram
  19. Finance, foreign (direct) investment, and the Dutch disease: The case of Colombia By Botta, Alberto; Godin, Antoine; Missaglia, Marco
  20. The impact of oil exploitation on wellbeing in Chad Author-Name: Gadom Djal Gadom Author-Name: Armand Mboutchouang Kountchou By Gbetoton Nad ge Ad le Djossou; Gilles Quentin Kane Author-Name: Abdelkrim Araar
  21. The Political Economy of Macroeconomic Policy in Arab Resource- Rich Economies By Adeel Malik
  22. The Impact of Oil Price Changes in a New Keynesian Model of the U.S. Economy By Francesca Rondina
  23. The impact of oil price shocks on the US stock market: A note on the roles of the US and non-US oil production By Kang, Wensheng; Ratti, Ronald. A.; Vespignani, Joaquin
  24. Oil Prices and Informational Frictions: The Time-Varying Impact of Fundamentals and Expectations By Joseph P. Byrne; Marco Lorusso; Bing Xu
  25. Oil Speculation and Herding Behavior in Emerging Stock Markets By Esin Cakan; Rıza Demirer; Rangan Gupta; Hardik A. Marfatia
  26. Oil, Volatility and Institutions: Cross-Country Evidence From Major Oil Producers By Kamiar Mohaddes; Amany El-Anshasy; Jeffrey B. Nugent
  27. Long-Run Pollution Exposure and Adult Mortality: Evidence from the Acid Rain Program By Alan I. Barreca; Matthew Neidell; Nicholas J. Sanders
  28. Assessing the sustainability of optimal pollution paths in a world with inertia By Marc Leandri; Mabel Tidball
  29. Faut-il négocier notre avenir climatique au moyen de quantités d’émissions ou de prix du carbone ? By Eloi Laurent
  30. Optimal energy policy for a carbon tax in Japan By Shibata, Tsubasa
  31. Immigration and the Dutch disease. A counterfactual analysis of the Norwegian resource boom 2004-2013 By Ådne Cappelen; Torbjørn Eika
  32. Paris after Trump: An inconvenient insight By Christoph Boehringer; Thomas Fox Rutherford
  33. Climat : Trump souffle le chaud et l'effroi By Aurélien Saussay

  1. By: Prudence Dato (IREGE, University of Savoie); Tun Durmaz (SEE, CityU Hong Kong and Econ. Dept., Yildiz Technical University); Aude Pommeret (SEE, CityU Hong Kong and IREGE, University of Savoie)
    Abstract: The aim of the paper is to analyse the efficient mix of investment in intermittent renewable energy and energy storage. The novelty of our model accrues from the flexibility it assigns to a household in feeding (resp. purchasing) electricity to (resp. from) the grid or store energy (or use stored energy) upon renewable energy installations. We study the consequences of demand side management by accounting for three levels of equipment in smart grids. The first level refers to the possibility to feed electricity to the grid that can simply be achieved by net metering. The second one concerns the installation of smart meters. The third level relates to energy storage. We analyse decisions concerning solar power and energy storage investments, and the consequences of energy storage and smart meters for electricity consumption and purchases of electricity from the grid. Additionally, we discuss the desirability of smart meter installation and study the implications of curtailment measures in avoiding congestion. Our results indicate that electricity prices need to be carefully contemplated when the objective is to rely less on the grid through smart grid deployment.
    Keywords: Renewable energy, Intermittency, Distributed generation, Energy Storage, Demand response
    JEL: D24 D61 D81 Q41 Q42
    Date: 2017–06
  2. By: Jan Abrell (ETH Zurich, Switzerland); Mirjam Kosch (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland)
    Abstract: This paper exploits the randomness and exogeneity of weather conditions to identify the economic cost of decarbonization through renewable energy (RE) support policies. We find that both the aggregate cost and the distribution of cost between energy producers and consumers vary significantly depending on which type of RE technology is promoted reflecting substantial heterogeneity in production cost, temporal availability of natural resources, and market conditions (i.e., time-varying demand, carbon intensity of installed production capacities, and opportunities for cross-border trade). We estimate that the cost for reducing one ton of CO2 emissions through subsidies for solar are EUR 500-1870. Subsidizing wind entails significantly lower cost, which can even be slightly negative, ranging from EUR 5-230. While the economic rents for energy producers always decrease, consumers incur three to five times larger costs when solar is promoted but gain under RE policies promoting wind.
    Keywords: Decarbonization, Renewable Energy Policies, Wind, Solar, Electricity, Economic Cost, Distributional impacts
    JEL: Q28 Q48 Q54 L94 C01
    Date: 2017–06
  3. By: SEKINE Takemasa
    Abstract: To date, many countries have introduced various policies to promote the diffusion of renewable energy. However, as many of those policies tend to incorporate local content requirements, there is often a lack of consistency with the rules under the World Trade Organization (WTO) agreements. The present case is the second decision by the WTO adjudicators in a series of disputes that encompass the issue relating to renewable energy policy. The factual background of the present case resembles the first case in the aforementioned series of disputes, namely Canada-FIT, and has contributed in further clarifying the precise meaning of legal elements contained in Articles III:8(a) and XX(d) of the General Agreement on Tariff and Trade (GATT). Moreover, it was the first to interpret Article XX(j). This policy discussion paper analyzes the case and considers the impact of the decisions of the WTO adjudicators on the various domestic policies including those related to government procurement and renewable energy.
    Date: 2017–06
  4. By: Nobuyuki Ito (Center for the Promotion of Interdisciplinary Education and Research, Kyoto University); Kenji Takeuchi (Graduate School of Economics, Kobe University); Shunsuke Managi (Urban Institute & School of Engineering, Kyushu University)
    Abstract: We estimate willingness-to-pay (WTP) for battery-switching electric vehicles (SEVs) by using a stated choice experiment. Our estimation results show that individuals have high WTP for SEVs, provided sufficient battery-switching stations exist. When battery-switching infrastructure represents 50% of the current number of gasoline stations, individuals are indifferent between conventional gasoline vehicles and SEVs, which have a 521 thousand yen lower price than gasoline vehicles. Moreover, the estimation results suggest that vehicle drivers may recognize SEVs as vehicles for shorter drives such as daily shopping trips and thereby have lower marginal WTP with respect to cruising range.
    Keywords: electric vehicle, battery-switching stations, stated preference method, choice experiment, willingness-to-pay
    JEL: L62 Q42 Q51
    Date: 2016–11
  5. By: Ali Hortaçsu; Fernando Luco; Steven L. Puller; Dongni Zhu
    Abstract: Oligopoly models of short-run price competition predict that large firms can exercise market power and generate inefficiencies. Inefficiency, however, can arise from other sources as well, such as from heterogeneity in strategic sophistication. We study such a setting in the Texas electricity market, in which bidding behavior of some firms persistently and significantly deviates from Nash-equilibrium bidding. We use information on bids and valuations to estimate the level of strategic sophistication of specific firms in the market. We do this embedding a Cognitive Hierarchy model into a structural model of bidding into auctions. We show that strategic sophistication increases with the size of the firm and it is also related to managers' educational backgrounds. We then use our model to perform counterfactual calculations about market efficiency under different scenarios that increase strategic sophistication of low-type firms either exogenously or through mergers with more sophisticated firms.
    JEL: D03 D22 L1
    Date: 2017–06
  6. By: Fontana, Magda; Iori, Martina; Nava, Consuelo Rubina (University of Turin)
    Abstract: The paper assesses the effects of the liberalization of the Italian electricity retail market by providing the first account of the determinants of switching by Italian households. It covers the interplay between demand and supply by including market concentration and horizontal integration among the factors that drive the choice of consumers. Finally, it inaugurates the application of Bayesian estimations in this topic area and presents a new dataset.
    Date: 2017–06
  7. By: Francesco Pasimeni (University of Sussex - Science and Technology Policy Research Unit (SPRU))
    Abstract: The Italian electricity system, based on a centralized grid, presents important inefficiencies in the transmission infrastructure and is highly import-dependent. At the same time, it has a high renewable potential. These three aspects might encourage Italy to shift from the traditional centralized grid to a new decentralized electricity system by adopting Micro-Grids (MGs). This transition, however, has not yet started. This work aims to study the possible scenarios of adoption and diffusion of MGs in Italy, by analysing the influence of regional factors, the potential role of subsidies and people’s attitude. An agent-based model is formulated in order to simulate the diffusion of MGs as a function of those characteristics and to analyse which policies could facilitate the adoption of MGs in the country. The results show the high dependence of the diffusion process on regional factors (electricity demand, renewable potential and population). Moreover, the model confirms that subsidies can encourage the diffusion (mainly when they are regional-based rather than national-based) and that a higher “green” attitude by users can accelerate the diffusion of MGs in Italy.
    Keywords: Micro-grids, Agent-based model, Innovation diffusion
    Date: 2017–05
  8. By: Roberto Baviera; Tommaso Santagostino Baldi
    Abstract: In this paper we develop a statistical arbitrage trading strategy with two key elements in hi-frequency trading: stop-loss and leverage. We consider, as in Bertram (2009), a mean-reverting process for the security price with proportional transaction costs; we show how to introduce stop-loss and leverage in an optimal trading strategy. We focus on repeated strategies using a self-financing portfolio. For every given stop-loss level we derive analytically the optimal investment strategy consisting of optimal leverage and market entry/exit levels. First we show that the optimal strategy a' la Bertram depends on the probabilities to reach entry/exit levels, on expected First-Passage-Times and on expected First-Exit-Times from an interval. Then, when the underlying log-price follows an Ornstein-Uhlenbeck process, we deduce analytical expressions for expected First-Exit-Times and we derive the long-run return of the strategy as an elementary function of the stop-loss. Following industry practice of pairs trading we consider an example of pair in the energy futures' market, reporting in detail the analysis for a spread on Heating-Oil and Gas-Oil futures in one year sample of half-an-hour market prices.
    Date: 2017–06
  9. By: François Cohen; Matthieu Glachant; Magnus Söderberg
    Abstract: This paper uses product-level data from the UK refrigerator market to evaluate the impact of electricity prices on product innovation. Our best estimate is that a 10% increase in the electricity price reduces the average energy consumption of commercialized refrigerator models by 2%. A large share of this reduction is explained by a reduction of freezing space. We also show that the exit of energy-inefficient products contributes more to energy reduction than the launch of new energy-efficient models. These findings suggest that innovation – the development of better technologies embodied in new products – does not respond strongly to energy price variations.
    Keywords: Induced Innovation; Energy Efficiency; Electricity Prices; Multiple Imputations; Product entry and exit.
    JEL: D12 L68 Q41 Q55
    Date: 2017–06–13
  10. By: Adnane Kendel (Université Côte d'Azur; GREDEG-CNRS); Nathalie Lazaric (Université Côte d'Azur; GREDEG-CNRS); Kevin Maréchal (Gembloux Agro-BioTech; Université de Liège, Belgium)
    Abstract: The abundant literature on consumer feedback shows that it is an efficient instrument for reducing household energy consumption. However, the reported reductions are strongly dependent on contextual factors and on the type of feedback provided. Given the importance of learning to this respect, this dimension constitutes the core focus of the present study which reports the findings of the TICELEC (i.e. French acronym for information technologies for responsible electricity consumption) project in France. The experiment included a control group (G1: the self-monitoring group) and one equipped group (G2). All participants reduced their consumption and learnt either directly from feedback or indirectly through self-monitoring. The amount of energy savings, which is larger than in similar experiments, can be explained by two factors. First, the specificity of our sample (i.e. high income, high consumption) which allows for potentially large energy savings. Second, high involvement of participants and the building of trust. The quantitative and qualitative dimensions of learning are then discussed. Additionally, we focus on peak-load shifting in G2 with 2 subgroups (G21 and G22). The higher proportion of shifters in G22 and the higher ‘quality’ of their shifting suggest a higher level of learning enabled by the more sophisticated feedback. Although this translated into only a moderately higher rate of energy savings, the higher degree of absorbed knowledge (i.e. through ‘learning by looking through connecting’) might lead to a qualitatively distinctive type of energy saving.
    Keywords: Household energy saving, learning, feedback, residential consumption
    JEL: D10 D11 D12 D13 D14 D83 Q41
    Date: 2017–06
  11. By: Chia-Lin Chang (Department of Applied Economics, Department of Finance, National Chung Hsing University, Taiwan); Michael McAleer (National Tsing Hua University, Taiwan; University of Sydney Business School, Australia; Erasmus School of Economics, Erasmus University Rotterdam, and Tinbergen Institute, The Netherlands; Complutense University of Madrid, Spain and Yokohama National Univ)
    Abstract: The paper presents an overview of recent topical research on global, energy, health & medical, and tourism economics, and global software. We have interpreted “global” in the title of the Journal of Reviews on Global Economics to cover contributions that have a global impact on economics, thereby making it “global economics”. In this sense, the paper is concerned with papers on global, energy, health & medical, and tourism economics, as well as global software algorithms that have global economic impacts. The topics covered include re-opening the Silk Road to transform Chinese trade, education and skill mismatches, education policy for migrant children, code of practice and indicators for quality management of official statistics, projections of energy use and carbon emissions, multi-fuel allocation for power generation using genetic algorithms, optimal active energy loss with feeder routing and renewable energy for smart grid distribution, demand for narcotics with policy implications, access to maternal and child health services of migrant workers, computer technology to improve medical information, heritage tourism, ecotourism impacts on the economy, society and environment, taxi drivers’ cross-cultural communication problems and challenges, hybrid knowledge discovery system based on items and tags, game development platform to improve advanced programming skills, quadratic approximation of the newsvendor problem with imperfect quality, classification of workflow management systems for emails, academic search engine for personalized rankings, creative and learning processes using game-based activities, personal software process with automatic requirements traceability to support start-ups, and comparing statistical and data mining techniques for enrichment ontology with instances.
    Keywords: Global economics; energy economics; health & medical economics; tourism economics; global software
    JEL: I15 L86 O13 Q47 Z32
    Date: 2017–06–19
  12. By: Hannah Goozee (IPC-IG)
    Abstract: "El séptimo objetivo de los Objetivos de Desarrollo Sostenibles (ODS) es dedicado a la aseguración del acceso a energía moderna accesible, confiable, y sostenible para todos para el año 2030. Mientras que la energía fue solo implícita en los Objetivos de Desarrollo de Milenio (ODM), los ODS crean un énfasis sobre la conexión entre el acceso de energía casero, su consumo, y la pobreza y el desarrollo. Esta atención está relacionada a la expansión del entendimiento de lo que es la pobreza, y como esta se ha expandido a más allá de una definición monetaria a ser vista como una medida de calidad de vida holística. Los ODS reconocen claramente la centralidad de la energía para el bien estar económico y social, como también para asuntos de salud y cambio climático, y reflejan los comentarios del Secretario-General de las Naciones Unidas, Ban Ki-moon, en la conferencia de Rio+20, que dice que "la energía es un hilo dorado que conecta el crecimiento económico, la equidad social, y el desarrollo sostenible.' "
    Keywords: Energia, pobreza, Objetivos de Desarrollo Sostenibles
    Date: 2017–05
  13. By: Alghalith, Moawia; Niu, Cuizhen; Wong, Wing-Keung
    Abstract: In this paper, we analyze the impacts of joint energy and output prices uncertainties on the inputs demands in a mean-variance framework. We find that the concepts of elasticities and variance vulnerability play important roles in the comparative statics analysis. If the firms' preferences exhibit variance vulnerability, increasing the variance of energy price will necessarily cause the risk averse firm to decrease the demands for the non-risky inputs. Further, we investigate two special cases with only uncertain energy price and only uncertain output price. In the case with only uncertain energy price, we find that the uncertain energy price has no impact on the demands for the non-risky inputs. Besides, if the firms' preferences exhibit variance vulnerability, increasing the variance of energy price will surely cause the risk averse firm to decrease the demand for energy.
    Keywords: Price Uncertainty, Mean-Variance, Energy price, Risk
    JEL: D81
    Date: 2017–06–17
  14. By: Bobylev Yuri (Gaidar Institute for Economic Policy)
    Abstract: The oil and gas sector is among principal sectors of the Russian economy and is the driving force in shaping the state budget revenues and the trade balance. In 2016, Russia’s crude oil production hit an all-time peak since 1990, and crude oil exports were close to an all-time high. Under the so-called tax maneuver in force in the oil industry, refining depth went up noticeably, production and export of fuel oil moved down and export of crude oil, a highly lucrative source of the budget revenues, increased.
    Keywords: Russian economy, oil and gas sector, oil production, oil prices, oil and gas export
    JEL: L71 L72
    Date: 2017
  15. By: Sambit Bhattacharyya (Department of Economics, University of Sussex); Michael Keller (Department of Economics, University of Sussex); Rabah Arezki (Research Department, IMF)
    Abstract: We investigate how giant and supergiant oil and mineral discoveries shape the political fortunes of national leaders using a large dataset of 1255 leaders in 158 countries over the period 1950 to 2010. We depart from the existing literature by using both ‘single risk’ and ‘multiple risk’ discrete time proportional hazard models. We find that mineral discoveries reduce risk for the incumbent in a ‘single risk model’ especially in a non-election year. In contrast oil discoveries reduce risk disproportionately more for the incumbent in countries with weak political institutions. The effects appear to be induced by actual income or rent rather than income expectations. In a ‘multiple risk model’ oil discovery significantly reduces the risk of losing office via military coup while resource (oil and minerals) discovery in general reduces the risk of resignation. Resource discovery does not seem to have any impact on the risk of election loss.
    Keywords: resource discovery; leaders; political survival
    JEL: D72 O11
    Date: 2017–06
  16. By: Ibrahim Elbadawi; Mohamed Goaied (IHEC Carthage); Moez Ben Tahar
    Abstract: This paper contributes to the literature on the interdependence between fiscal and monetary policies in resource-dependent economies. In the context of this general theme we analyze the fiscal foundation of the choice of monetary regimes and the extent of pro-cyclicality of fiscal policy during the post mid-1990s oil boom in the relatively under-research oil-dependent Arab economies. We find preliminary evidence on the existence of a threshold effect for oil rents per capita, below which countries tend to be subject to fiscal dominance and pro-cyclical fiscal policy. This might explain the country experiences of low rents per capita and relatively populous Sudan and Yemen, compared to the GCC member countries of Oman, Saudi Arabia, the UAE as well as Algeria. The latter managed to sustain credible de facto pegged exchange rate regimes and convertible currencies (for the GCC) or graduate to flexible regime (for Algeria). Instead, the former had to abandon their pegged regimes as a result of their unsuccessful exchange rate-based stabilization programs. However, the contrast with resource-dependent Chile and Norway suggests that for the Arab oil economies to accommodate future oil busts they need to establish explicit fiscal rules and high technical capabilities for conducting monetary policy.
    Date: 2017–06–07
  17. By: Jeetendra Khadan
    Abstract: Energy revenues represent roughly 45 percent of Trinidad and Tobago's GDP and are highly volatile since they are correlated with the price of oil and gas. Hence, sharp changes in energy prices, whether temporary or sustained, can have important consequences for economic growth and overall macroeconomic performance. After the 2014 crash in oil prices, a key challenge that emerged for policymakers in hydrocarbon-exporting countries is how to manage fiscal retrenchment in an environment of subdued growth. Using structural vector autoregression, this article examines three questions related to this challenge by focusing on Trinidad and Tobago: (1) what is the asymmetric effect of energy revenue shocks on macroeconomic performance, (2) what is the asymmetric effect of energy revenue shocks on government expenditure (disaggregated by categories), and (3) what is the effect of government expenditure shocks (disaggregated by categories) on economic growth. The results suggest that although positive energy revenue shock increases growth almost immediately, it is not sustained. A negative energy revenue shock is found to have a greater adverse effect on primary expenditure than a positive shock and this largely occurs through a reduction in capital expenditure. Transfers and subsidies, and goods and services are the most sensitive components of current expenditure to positive energy shocks. With respect to the effect of expenditure on growth, transfers and subsidies significantly reduce growth in the short run, whereas other categories of expenditure are found to have a largely positive effect on growth. These findings suggest three important implications for policymakers: the first is to reduce and or reorient public expenditure away from transfers and subsidies and towards more growth-enhancing areas; the second is the need for clear fiscal rules, and to more effectively balance the role of fiscal policy as a growth stimulus while also performing other social functions; and thirdly, these results bring into sharp focus the effectiveness of the rules of the country's stabilization fund to manage windfall energy revenues.
    Keywords: Government Revenue, GDP Growth, Oil Prices, Exchange rates, Commodity Prices, Wages, Macroeconomics, Economic Impact Analysis, economic growth, oil prices
    JEL: Q33 E37 E32
    Date: 2016–12
  18. By: Ahmed El-Ashram
    Abstract: The question of how scaling up public investment could affect fiscal and debt sustainability is key for countries needing to fill infrastructure gaps and build resilience. This paper proposes a bottom-up approach to assess large public investments that are potentially self-financing and reflect their impact in macro-fiscal projections that underpin the IMF’s Debt Sustainability Analysis Framework. Using the case of energy sector investments in Caribbean countries, the paper shows how to avoid biases against good projects that pay off over long horizons and ensure that transformative investments are not sacrificed to myopic assessments of debt sustainability risks. The approach is applicable to any macro-critical investment for which user fees can cover financing costs and which has the potential to raise growth without crowding-out.
    Date: 2017–06–12
  19. By: Botta, Alberto; Godin, Antoine; Missaglia, Marco
    Abstract: In recent years Colombia has grown relatively rapidly, but it has been a biased growth. The energy sector (the locomotora minero-energetica, to use the rhetorical expression of President Juan Manuel Santos) grew much faster than the rest of the economy, while the manufacturing sector registered a negative rate of growth. These are classic symptoms of the well-known ‘Dutch disease’, but our purpose here is not to establish whether the Dutch disease exists or not, but rather to shed some light on the financial viability of several, simultaneous dynamics: (i) the existence of a traditional Dutch Disease being due to a large increase in mining exports and a significant exchange rate appreciation; (ii) a massive increase in foreign direct investment (FDI), particularly in the mining sector; (iii) a rather passive monetary policy, aimed at increasing purchasing power via exchange rate appreciation; (iv) more recently, a large distribution of dividends from Colombia to the rest of the world and the accumulation of mounting financial liabilities. The paper will show that these dynamics constitute a potential danger for the stability of the Colombian economy. Some policy recommendations are also discussed.
    Keywords: Colombia; Dutch Disease; Balance of Payments
    Date: 2016–05–24
  20. By: Gbetoton Nad ge Ad le Djossou; Gilles Quentin Kane Author-Name: Abdelkrim Araar
    Abstract: This study assesses the impact of oil revenues on wellbeing in Chad using data from the two last Chad Household Consumption and Informal Sector Surveys (ECOSIT 2 & 3), conducted in 2003 and 2011, respectively, by the National Institute of Statistics for Economics and Demographic Studies (INSEED) and, from the College for Control and monitoring of Oil Revenues (CCSRP). To achieve the research objective, we first estimate a synthetic index of multidimensional wellbeing (MDW) based on a large set of welfare indicators. Then, the Difference-in-Difference (DID) approach is used to assess the impact of oil revenues on the average MDW at departmental level. We find evidence that departments receiving intense oil transfers increased their MDW about 35% more than those disadvantaged by the oil revenues redistribution policy. Moreover, the further a department is from the capital city NÕDjamena, the lower its average MDW. We conclude that to better promote economic inclusion in Chad, the government should implement a specific policy to better direct the oil revenue investment in the poorest departments.
    JEL: I32 D63 O13 O15
    Date: 2017
  21. By: Adeel Malik (University of Oxford)
    Abstract: Revisiting macroeconomic policies and outcomes of Arab resource-rich economies (RREs), this paper synthesizes the political economy considerations that underpin policy choices. The paper argues that, in the context of Arab RREs, fiscal and financial sector policies play a particularly important role in absorbing natural resource rents. Fiscal policy is highly pro-cyclical and rooted in the underlying political settlement, which is based on extensive distributional commitments. Financial systems are deep but are known for restricted financial access to vast areas of economy. Given the excessive dependence on hydrocarbon rents and the prevalence of fixed exchange rate regimes, the external constraint remains more binding. Even where monetary policy has greater room to operate, existing policy frameworks are not geared towards domestic targets, such as inflation and unemployment, and are largely determined outside the purview of macroeconomic policy. I argue that the political objective function is essential for understanding these macroeconomic arrangements. With weak productive constituencies and few institutional constraints, macroeconomic policy involves limited feedback from the private sector and upholds the interest of the sovereign. In this milieu, institutional constraints on fiscal policy are more important than central bank independence. The paper also discusses the stability implications of current macroeconomic arrangements, arguing that stability in Arab RREs is almost entirely predicated on the uninterrupted flow of oil rents rather than resilient institutional structures.
    Date: 2017–06–07
  22. By: Francesca Rondina (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: This paper studies the impact of a change in real oil prices on output and inflation in a New Keynesian model of the U.S. economy. The main goal of the analysis is to assess whether the cross-equation restrictions imposed by the model play a role in the transmission mechanism of exogenous oil price shocks. I find that the interactions between oil prices, domestic variables, and expectations implied by the New Keynesian framework generate responses that are quite modest, and that can depart from those emerging from a more unrestricted SVAR model. I also find that changes in oil prices that cannot be predicted based on the available information are, for the most part, exogenous to the U.S. economy. As such, augmenting the model to account for their possible endogeneity does not deliver substantially different results.
    Keywords: Oil Prices, Endogeneity, New Keynesian Model, Expectations
    JEL: E12 E17 Q43 Q47
    Date: 2017
  23. By: Kang, Wensheng (Kent State University); Ratti, Ronald. A. (Economics, Finance and Property, Western Sydney University); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: Kilian and Park (IER 50 (2009), 1267–1287) find shocks to oil supply are relatively unimportant to understanding changes in U.S. stock returns. We examine the impact of both U.S. and non- U.S. oil supply shocks on U.S. stock returns in light of the unprecedented expansion in U.S. oil production since 2009. Our results underscore the importance of the disaggregation of world oil supply and of the recent extraordinary surge in the U.S. oil production for analysing impact on U.S. stock prices. A positive U.S. oil supply shock has a positive impact on U.S. real stock returns. Oil demand and supply shocks are of comparable importance in explaining U.S. real stock returns when supply shocks from U.S. and non-U.S. oil production are identified.
    Keywords: oil prices, stock returns, U.S. oil production
    JEL: E44 G12 Q43
    Date: 2016–03
  24. By: Joseph P. Byrne (Department of Accountancy, Economics and Finance, School of Social Sciences, Heriot-Watt University); Marco Lorusso (Centre for Energy Economics Research and Policy, Heriot-Watt University); Bing Xu (School of Management and Languages G.54 Mary Burton Building Heriot-Watt University Edinburg)
    Abstract: This paper accounts for informational frictions when modelling the time-varying relationship between crude oil prices, traditional fundamentals and expectations. Informational frictions force a wedge between oil prices and supply and/or demand shocks, especially during periods of elevated risk aversion and uncertainty. In such a context expectations can be a key driver of oil price movements. We utilize a variety of proxies for forward-looking expectations, including business confidence, consumer confidence and leading indicators. In addition, our paper implements a time-varying parameter approach to account empirically for time-varying informational frictions. Our results illustrate firstly that oil supply shocks played an important role in both the 1970’s and coinciding with the recent shale oil boom. Secondly, demand had a positive impact upon oil prices, especially from the mid-2000’s. Finally, we provide evidence that oil prices respond strongly to expectations but the source of the shock matter: business leaders’ expectations are positively related, while markets’ expectations are not strongly linked to oil prices.
    Keywords: Crude Oil Prices; Informational Frictions; Fundamentals; Expectations; Time-Varying Parameters
    JEL: C30 E30 F00 Q43
    Date: 2017–06
  25. By: Esin Cakan (Department of Economics, University of New Haven, USA); Rıza Demirer (Department of Economics & Finance, Southern Illinois University Edwardsville, Edwardsville, USA); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Hardik A. Marfatia (Department of Economics, Northeastern Illinois University, Chicago, USA)
    Abstract: This paper explores the relationship between stock and commodity markets from a novel perspective by examining the relationship between speculation in the oil market and investor herding in stock markets. Using firm level data from three energy importing and exporting nations, namely Russia, Brazil, and Turkey, we show that these markets often switch between herding and anti-herding states, while herding is more prevalent in the case of Russia. We also find that speculative activities in the global oil market significantly affect investors behavior in Russia and Brazil with greater oil speculation associated with herding in these markets. Our findings suggest that policy makers should watch measures of speculative activities in the commodity markets for possible signals in order to model and monitor investor behavior in their local markets.
    Keywords: Emerging markets, Herd behavior, Crude oil, Speculative ratio
    JEL: G14 G15
    Date: 2017–06
  26. By: Kamiar Mohaddes (University of Cambridge); Amany El-Anshasy; Jeffrey B. Nugent
    Abstract: This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961—2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such.
    Date: 2017–06–29
  27. By: Alan I. Barreca; Matthew Neidell; Nicholas J. Sanders
    Abstract: Though over 90 percent of benefits from environmental quality improvements are attributed to long-term exposure, nearly all quasi-experimental evidence on the effects of pollution on health exploits changes in short-term exposure. Quantifying long-run exposure impacts requires a lasting, exogenous change in ambient pollution. Even if the initial change in pollution is exogenous, the long-run nature allows more time for economic agents to respond to changes in pollution, resulting in endogenous pollution exposure. We estimate the effects of long-run pollution exposure on mortality among adults by exploiting the United States Acid Rain Program (ARP) as a natural experiment. The ARP, which regulated emissions from coal power plants, created a permanent change in pollution across vast distances, enabling us to define broad treatment areas to subsume many potential confounding effects. We use a difference-indifferences design, comparing changes in mortality over time in counties “near” regulated plants to changes in mortality in similar counties “far” from the plants. We find relative mortality in treatment counties decreased after the introduction of the ARP, with mortality improvements growing steadily over time in both economic and statistical significance. The ARP had no significant effect on residential sorting or employment, helping rule out selection or economic mechanisms. Analysis by cause of death supports the role of fine particulate matter as the relevant pollutant.
    JEL: I10 Q51 Q53
    Date: 2017–06
  28. By: Marc Leandri (UniversitŽ de Versailles Saint Quentin Ð CEMOTEV); Mabel Tidball (INRA-LAMETA)
    Abstract: Most formal optimal pollution control models assume a constant natural assimilative capacity, despite the biophysical evidence on feedback effects that can degrade this environmental function, as it is the case with the reduction of ocean carbon sinks in the context of climate change. The few models that do consider this degradation establish a bijective relation between the pollution stock and the assimilative capacity, thus ignoring the inertia mechanism at stake. Indeed the level of assimilative capacity is not solely determined by the current pollution stock but by the history of this stock and by the time the ecosystem remains above the degradation threshold. We propose an inertia assessment tool that tests the sustainability of any benchmark optimal pollution path when the inertia of the assimilative capacity degradation process is taken into account. Our simulations show a strong sensitivity to both the inertia degradation speed and the discount rate.
    Keywords: Optimal pollution control, Climate Change, Ecosystem Services, Assimilative Capacity, Inertia
    JEL: D62 H23 Q01 Q5 Q54
    Date: 2017–06
  29. By: Eloi Laurent (Observatoire français des conjonctures économiques)
    Abstract: Cet article se propose de discuter la pertinence de l’unité actuelle des négociations climatiques : la tonne de CO2. Après avoir montré les limites fondamentales de cette approche par les quantités au regard des dynamiques passées, actuelles et prévisibles d’émissions de gaz à effet de serre, l’article propose de développer en vue de la COP 21 les jalons d’une approche par le prix du carbone. Celle-ci ouvre sur une négociation ayant pour fondement la valeur sociale du carbone qui renvoie aux enjeux de justice intra-générationnelle et intergénérationnelle dont la mise en lumière est susceptible de faire progresser des négociations climatiques encore trop peu avancées.
    Keywords: Négociation; Climat; Prix du carbone
    Date: 2015–10
  30. By: Shibata, Tsubasa
    Abstract: Climate change is a global challenge that must be addressed at the international level. In December 2015, the Paris Agreement was adopted at the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) held in Paris. The Paris agreement is aimed at keeping global temperature increases below 2 °C. Toward this goal, the Japanese government plans to reduce greenhouse gas emissions by 26% by fiscal year 2030 compared with fiscal year 2013. In this study, we evaluate the feasibility of Japan’s energy policy for reducing CO2 emissions. We construct a macroeconometric model linked to an energy model to show the optimal future energy policy for Japan by applying optimal control to the social welfare function.
    Keywords: Energy policy,Climatic change,Environmental problems,Carbon tax,Energy model,Macroeconometric model,Optimal control
    JEL: C30 P28 Q43 Q48
    Date: 2017–03
  31. By: Ådne Cappelen; Torbjørn Eika (Statistics Norway)
    Abstract: The EU-enlargement in 2004 increased labour migration and affected the Norwegian labour market in particular. We study how this modified the Dutch disease effects during the resource boom 2004- 2013. In the Norwegian case the resource movement effect of the petroleum industry has historically dominated the spending effect. One reason is the introduction of the fiscal policy rule in 2001 that limited spending. We find that economic growth in Norway was roughly doubled during this period due to the resource boom while total population increased by 2 percent. Moreover, both the resource movement and spending effects on Mainland GDP were roughly unaffected by immigration while employment increased, real wages fell and so did productivity.
    Keywords: Dutch disease; Immigration
    JEL: B22 J11 Q33
    Date: 2017–06
  32. By: Christoph Boehringer (University of Oldenburg, Department of Economics); Thomas Fox Rutherford (University of Wisconsin, Madison, WI 53706, USA)
    Abstract: With his announcement to pull the US out of the Paris Agreement US President Donald Trump has snubbed the international climate policy community. Key remaining parties to the Agreement such as Europe and China might call for carbon tariffs on US imports as sanctioning instrument to coerce US compliance. Our analysis, however, reveals an inconvenient insight for advocates of carbon tariffs: Given the possibility of retaliatory tariffs across all imported goods, carbon tariffs do not constitute a credible threat for the US. A tariff war with its main trading partners China and Europe might make the US worse off than compliance to the Paris Agreement but China, in particular, should prefer US defection to a tariff war.
    Keywords: Paris Agreement, US withdrawal, carbon tariffs, optimal tariffs, tariff war, computable general equilibrium
    Date: 2017–06
  33. By: Aurélien Saussay (Observatoire français des conjonctures économiques)
    Abstract: Donald Trump a donc une nouvelle fois respecté une de ses promesses de campagne. Le retrait des Etats-Unis de l’Accord de Paris ne semblait pourtant pas acquis. Des personnalités centrales du lobby pétrolier américain comme le Secrétaire d’Etat, Rex Tillerson, ancien patron d’Exxon-Mobil, son actuel PDG, Darren Woods, ou encore le gouverneur du Texas, principal Etat producteur de pétrole aux Etats-Unis, conseillaient au président de maintenir les Etats-Unis au sein de l’accord – ne serait-ce que pour en influencer l’application. Ce retrait n’est assurément pas une bonne nouvelle. Il n’en constitue pas pour autant la catastrophe que l’on pourrait redouter.
    Keywords: Etats Unis; Changement climatique; Accord de Paris
    Date: 2017–06

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