| 来源类型 | Research papers
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| 规范类型 | 报告
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| The Role of Energy Policy on Economic Growth in Korea |
| K. H. Park
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| 发表日期 | 2011-12-31
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| 出版年 | 2011
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| 语种 | 英语
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| 摘要 | Energy is necessary for economic production and economic growth but the mainstream theory of economic growth pays no attention to the role of energy. Toman and Jemelkova(2003) argue that most of the literature on energy and economic development discusses how development affects energy use rather than vice versa.
This study examines both the relationship between energy consumption and economic growth and the effects of energy prices in a small open economy in a two-sector framework. With increasing globalization, each country has become more open to, and integrated with, other countries. As the volume of international trade gradually increases among countries, so does the distinction between the traded and the nontraded sector. The impact of economic shocks varies between the economic sectors because of production technology differences and other structural differences.
Different shocks affect the economy in different ways in terms of the real exchange rate or the relative price, and consumers alter their consumption patterns accordingly. As a result, we observe the reallocation of consumption and inputs for the production of goods between sectors. Such an important transmission mechanism can only be modeled if we introduce both traded and nontraded sector.
In this report, energy consumption and real GDP are selected for the Granger Causality test. We found that both energy consumption and real GDP granger cause each other. For the long run analysis, we use vector error correction model and found that there is long run relationship between energy consumption and real GDP.
To see the effects of energy prices on the macroeconomic variables, we use infinite horizon optimizing model. Household derives utility from both tradable and nontradable consumption. Energy is used as an input in the production process along with labor and capital in both sectors. Factors of production are perfectly mobile across two sectors and aggregate labor supply is perfectly inelastic. For simplicity, we assume that the tradable goods are used for consumption only and nontradable goods are used for both consumption and investment. The small economy takes the world interest rate and the unit price of imported energy as given.
There is also important aspect of our model that merits attention. One of the objectives of this study is also to evaluate the effects of domestic inflation. To do so, we need to introduce money into the model through Cash-in-advance(CIA) constraint.
Within this framework, we examine the effects of a permanent increase in the energy price and domestic inflation. An energy price increase changes the relative price between two consumption goods through the changes in production. Energy price changes induce sectoral resource reallocations as well. Labor moves from the traded to the nontraded sector after the increase in the energy price regardless of the capital intensity. Since the production of the nontradable goods is less affected by shocks, the nontraded sector attracts labor from the traded sector which alters the whole structure of economy.
A permanent increase in energy prices decrease the steady state output, capital stock, and an investment level in the economy inducing the current account surplus. The important advantage of using two-sector model is enabling us to see the sectoral and overall changes of capital, output, employment, and consumption. We also calibrate the model with standard parameter values for quantitative analysis. The effects are significant. Sectoral effects are more pronounced than economy wide aggregate effects. |
| URL | http://www.keei.re.kr/web_keei/en_publish.nsf/by_report_year/2BCC3B0B0D821A1A492579AA0021BB23?OpenDocument
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| 来源智库 | Korea Energy Economics Institute (Republic of Korea)
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/322654
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推荐引用方式
GB/T 7714 |
K. H. Park. The Role of Energy Policy on Economic Growth in Korea. 2011.
|
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