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The COVID-19-triggered collapse in oil prices in March and April 2020 was the seventh, and by far the most severe, in a series of such collapses since 1970. This paper, first, compares this most recent collapse and its drivers with previous ones in an event study. It finds that it was associated with an exceptionally severe plunge in oil demand. Second, in a local projections model, this paper estimates the implications of demand- and supply-driven oil price collapses for growth in emerging markets and developing economies (EMDEs). The paper finds that steep oil price collapses were associated with significant and lasting output losses in energy-exporting EMDEs but no meaningful output gains in energy-importing EMDEs. These results are robust to multiple robustness checks.
Coronavirus --- COVID-19 --- Demand Factors --- Economic Growth --- Emerging Market Economies --- Energy Markets --- Energy Policies and Economics --- Local Projections Model --- Macroeconomic Impact --- Macroeconomic Management --- Oil and Gas --- Oil Prices --- Pandemic Impact --- Supply Factors
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Many countries have undertaken market-oriented reforms of the power sector over the past four decades. However, the literature has not investigated whether the reforms have contributed to economic development. This study aims to assess the potential macroeconomic impacts of an element of the power sector reform process that China started in 2015. It uses an energy sector TIMES model and a computable general equilibrium model. The study finds that the price of electricity in China would be around 20 percent lower than the country is likely to experience in 2020, if the country follows the market principle to operate the power system. The reduction in the price of electricity would spill over throughout the economy, resulting in an increase in gross domestic product of more than 1 percent in 2020. It would also increase household income, economic welfare, and international trade.
CGE Model --- Computable General Equilibrium Model --- Economic Growth --- Economic Theory and Research --- Electric Power --- Electricity --- Energy --- Energy and Environment --- Energy Conservation and Efficiency --- Energy Policies and Economics --- Energy Sector Planning --- Macroeconomic Impact --- Macroeconomics and Economic Growth --- Power Sector Reform
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The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional "misalignment" view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate - which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth.
Currencies and Exchange Rates --- Debt Markets --- Economic growth --- Economic Stabilization --- Emerging Markets --- Exchange rate depreciation --- Finance and Financial Sector Development --- Growth rate --- Macroeconomic impact --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Policy Research --- Private Sector Development --- Real exchange --- Real exchange rate --- Real exchange rate volatility --- Real exchange rates --- Saving rates
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Top-down economic models, such as computable general equilibrium models, are the common tools to assess the economic impacts of climate change policies. However, these models are incapable of representing the detailed technological characteristics of the sources of greenhouse gas emissions. The economic impacts measured by the top-down economic models are likely to be overestimated. This study attempts to quantify the overestimation by measuring the economic impacts linking the top-down model with a bottom-up engineering model for the energy sector. The study uses meeting China's pledges under the Paris Agreement for testing this hypothesis. The study shows that the economic impacts measured by the stand-alone top-down model are almost three times as high as those resulting from the model after linking it with the bottom-up model. However, the findings are sensitive to the assumptions and existing or planned policies on energy technologies considered in the bottom-up model.
Bottom-Up Model --- Climate Change --- Climate Change Impacts --- Climate Change Mitigation and Green House Gases --- Climate Policy --- Computable General Equilibrium Model --- Economic Theory and Research --- Emissions --- Energy --- Energy and Environment --- Energy Conservation and Efficiency --- Energy Demand --- Energy Engineering --- Energy Modeling --- Energy Policies and Economics --- Energy Technology --- Environment --- Greenhouse Gas --- Macroeconomic Impact --- Macroeconomics and Economic Growth --- Power Sector Planning --- Top-Down Model --- Vertical Linkage
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The view that policies directed at the real exchange rate can have an important effect on economic growth has been gaining adherents in recent years. Unlike the traditional "misalignment" view that temporary departures of the real exchange rate from its equilibrium level harm growth by distorting a key relative price in the economy, the recent literature stresses the growth effects of the equilibrium real exchange rate itself, with the claim being that a depreciated equilibrium real exchange rate promotes economic growth. While there is no consensus on the precise channels through which this effect is generated, an increasingly common view in policy circles points to saving as the channel of transmission, with the claim that a depreciated real exchange rate raises the domestic saving rate - which in turn stimulates growth by increasing the rate of capital accumulation. This paper offers a preliminary exploration of this claim. Drawing from standard analytical models, stylized facts on saving and real exchange rates, and existing empirical research on saving determinants, the paper assesses the link between the real exchange rate and saving. Overall, the conclusion is that saving is unlikely to provide the mechanism through which the real exchange rate affects growth.
Currencies and Exchange Rates --- Debt Markets --- Economic growth --- Economic Stabilization --- Emerging Markets --- Exchange rate depreciation --- Finance and Financial Sector Development --- Growth rate --- Macroeconomic impact --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Policy Research --- Private Sector Development --- Real exchange --- Real exchange rate --- Real exchange rate volatility --- Real exchange rates --- Saving rates
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