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Oil and the World Economy: Some Possible Futures

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  • Mr. Michael Kumhof
  • Mr. Dirk V Muir

Abstract

This paper, using a six-region DSGE model of the world economy, assesses the GDP and current account implications of permanent oil supply shocks hitting the world economy at an unspecified future date. For modest-sized shocks and conventional production technologies the effects are modest. But for larger shocks, for elasticities of substitution that decline as oil usage is reduced to a minimum, and for production functions in which oil acts as a critical enabler of technologies, GDP growth could drop significantly. Also, oil prices could become so high that smooth adjustment, as assumed in the model, may become very difficult.

Suggested Citation

  • Mr. Michael Kumhof & Mr. Dirk V Muir, 2012. "Oil and the World Economy: Some Possible Futures," IMF Working Papers 2012/256, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/256
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=40066
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    References listed on IDEAS

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    1. Benes, Jaromir & Chauvet, Marcelle & Kamenik, Ondra & Kumhof, Michael & Laxton, Douglas & Mursula, Susanna & Selody, Jack, 2015. "The future of oil: Geology versus technology," International Journal of Forecasting, Elsevier, vol. 31(1), pages 207-221.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Allegret, Jean-Pierre & Couharde, Cécile & Coulibaly, Dramane & Mignon, Valérie, 2014. "Current accounts and oil price fluctuations in oil-exporting countries: The role of financial development," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 185-201.
    2. repec:spo:wpmain:info:hdl:2441/21l76d3ol49hnr6addquaramgh is not listed on IDEAS
    3. John P DeLong & Oskar Burger, 2015. "Socio-Economic Instability and the Scaling of Energy Use with Population Size," PLOS ONE, Public Library of Science, vol. 10(6), pages 1-12, June.
    4. repec:hal:spmain:info:hdl:2441/4bof55ub0d81jp8cjpl5p0ecup is not listed on IDEAS
    5. Kümmel, Reiner & Lindenberger, Dietmar & Weiser, Florian, 2015. "The economic power of energy and the need to integrate it with energy policy," Energy Policy, Elsevier, vol. 86(C), pages 833-843.
    6. Malmaeus, J. Mikael & Alfredsson, Eva C., 2017. "Potential Consequences on the Economy of Low or No Growth - Short and Long Term Perspectives," Ecological Economics, Elsevier, vol. 134(C), pages 57-64.
    7. Gissela Landa & Frédéric Reynés & Ivan Islas & François-Xavier Bellock & Fabio Grazi, 2015. "Double Dividend of Low-carbon Growth in Mexico: A Dynamic General Equilibrium Assessment," Working Papers hal-03389326, HAL.
    8. Martin de Wit & Matthew Kuperus Heun & Douglas J Crookes, 2013. "An overview of salient factors, relationships and values to support integrated energy-economic systems dynamic modelling," Working Papers 02/2013, Stellenbosch University, Department of Economics.
    9. Landa Rivera, Gissela & Reynès, Frédéric & Islas Cortes, Ivan & Bellocq, François-Xavier & Grazi, Fabio, 2016. "Towards a low carbon growth in Mexico: Is a double dividend possible? A dynamic general equilibrium assessment," Energy Policy, Elsevier, vol. 96(C), pages 314-327.
    10. Fabio GRAZI & François-Xavier BELLOCQ & Frédéric REYNES & Gisella LANDA & Ivan ISLAS, 2017. "Double Dividend of Low-carbon Growth in Mexico: A Dynamic General Equilibrium Assessment," Working Paper ebdeaa62-c32a-4c84-baf0-2, Agence française de développement.
    11. Elekdag, Selim & Muir, Dirk & Wu, Yiqun, 2015. "Trade linkages, balance sheets, and spillovers: The Germany-Central European Supply Chain," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 374-387.
    12. Gissela Landa & Frederic Raynes & Ivan Islas & François-Xavier Bellocq & Fabio Grazi, 2015. "Toward a low carbon growth in Mexico : is a double dividend possible ? A dynamic general equilibrium assessment," Documents de Travail de l'OFCE 2015-24, Observatoire Francais des Conjonctures Economiques (OFCE).
    13. Mr. Selim A Elekdag & Mr. Dirk V Muir, 2013. "Trade Linkages, Balance Sheets, and Spillovers: The Germany-Central European Supply Chain," IMF Working Papers 2013/210, International Monetary Fund.
    14. Boufateh, Talel & Ajmi, Ahdi Noomen & El Montasser, Ghassen & Issaoui, Fakhri, 2013. "Dynamic relationship between energy consumption and income in Tunisia: A SVECM approach," MPRA Paper 44539, University Library of Munich, Germany.
    15. International Monetary Fund, 2013. "Morocco: Selected Issues," IMF Staff Country Reports 2013/110, International Monetary Fund.
    16. repec:hal:spmain:info:hdl:2441/21l76d3ol49hnr6addquaramgh is not listed on IDEAS
    17. Gissela Landa & Frédéric Reynés & Ivan Islas & François-Xavier Bellock & Fabio Grazi, 2015. "Toward a low carbon growth in Mexico : is a double dividend possible ? A dynamic general equilibrium assessment," Working Papers hal-03459685, HAL.
    18. repec:spo:wpmain:info:hdl:2441/4bof55ub0d81jp8cjpl5p0ecup is not listed on IDEAS

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