Macroeconomics [i.e. Macroeconomic] impacts of energy shocks by Bert G Hickman; Hillard G Huntington; James L Sweeney

By Bert G Hickman; Hillard G Huntington; James L Sweeney

Large-scale macroeconomic versions were used largely to investigate a variety of very important monetary concerns. They have been initially built to check the economy's reaction to financial and financial regulations. through the Seventies those versions have been accelerated and revised to trace the inflationary approaches and to include key strength variables so they might be used to envision the affects of power expense shocks. This examine compares the responses of 14 renowned macroeconomic types to supply-side shocks within the type of unexpected strength cost raises or decreases and to rules for lessening the affects of expense jumps. 4 power cost shocks have been tested: oil rate raises of fifty and 20 percentage, an oil cost relief of 20 percentage, and an eighty percentage bring up in family traditional gasoline costs. 5 coverage responses have been thought of for offsetting the GNP affects of the bigger oil fee raise: financial lodging, an source of revenue tax cost relief, a rise within the funding tax credits for apparatus, a discount within the employer's payroll tax expense, and an oil stockpile unlock

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The deflator for gross domestic purchases incorporates the prices of goods and services purchased for investment and for the government as well as for consumption. The inflation effects in the previous figures were measured by the GNP deflator because it is the one price index reported by all models. As shown in Table 6, the principal difference between the various inflation measures occurs in the first year of the shock when the inflation rate for the GNP deflator is substantially smaller. After the first year, however, the different indices display similar inflation effects, because the price effects are pre­ dominately indirect results of the previous rise in the price of imported oil.

Imports in the EMF oil shock scenarios, thus increasing net exports. The resultant increase in the demand for goods and services mitigates slightly the GNP losses originating in consumption and investment. The decline in the quan­ tity of petroleum imports, responding to both higher oil prices and lower economic activity, primarily accounts for this result. A contributing but less important factor is that exports also fall less than nonpetroleum imports in ^^Over 70 percent of federal government purchases are related to national defense.

G. G. L. Sweeney, Amsterdam: North-Holland, 1987 (Chapter 2). 22 1 2 A Summary of the Key 3 4 Results YEAR AFTER THE DISRUPTION Figure 2: Impact of a 50 Percent Oil Price Increase on Potential Real GNP stagflationary conditions. Table 5 sununarizes these impacts with the me­ dian^ result estimated by the models. 0 percent. Some recovery in real output and moderation in the price effects are evident in these results for later years. However, the rates of inflation and economic growth are essentially unchanged by the fourth year, although the output path remains lower and the price level is higher.

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