The Price Normalisation Problem in General Equilibriun Models with Oligopoly Power: An Attempt at Perspective

In general equilibrium models with oligopolistic firms, equilibrium outcomes may depend on the choice of numeraire. When firms have the power to influence prices strategically, different price normalisations entail objective profit functions which are generally not monotone transformations of each other. Hence, under the assumption of profit maximization an arbitrary change in the price normalisation rule amounts effectively to a change in the objective pursued by firms. Applied general equilibrium analysts using models with imperfect competition have largely ignored the price normalisation problem. In several recent contributions to the literature, applied modellers are explicitly criticized for their neglect to address the numeraire issue. The purpose of this paper is to assess the validity and practical relevance of these criticisms for applied policy analysis.applied general equilibrium analysis, imperfect competition, price normalization problem, oligopoly, numeraire, CGE analysis

Approaches to the Economics of Climate Change: A Survey of Literature

This paper is aimed at providing basic underlying principles in viewing the climate change paradigm, focusing on economic approaches necessary to analyze the issue. Economic approaches include market as well as non-market approaches. This distinction is deemed important as many efforts related to adaptation and mitigation to climate change often neglects the mechanism. Keywords: climate change, economic approaches, market approach, non-market approach

Approaches to the Economics of Climate Change: a Survey of Literature

This paper is aimed at providing basic underlying principles in viewing the climate change paradigm, focusing on economic approaches necessary to analyze the issue. Economic approaches include market as well as non-market approaches. This distinction is deemed important as many efforts related to adaptation and mitigation to climate change often neglects the mechanism

Economic, Environmental and International Trade Effects of the EU Directive on Energy Tax Harmonization

In October 2003, the European Union introduced a Directive which widens the scope of the EU's minimum taxation system from mineral oils to all energy products including coal, natural gas and electricity. It aims at reducing distortions that currently exist between Member States as well as between energy products. In addition, it increases previous minimum tax rates and thus the incentive to use energy more efficiently. The Directive will lead to changes in the energy tax schemes in a number of countries, in particular some southern Member Countries (Greece, Spain, Portugal) and most of the Eastern European EU candidate countries. In this paper, we analyze the effects of the EU energy tax harmonization with GTAP-E, a computable general equilibrium model. Particular focus is placed on the Eastern European countries which became new members of the EU in May 2004. We investigate the effects of the tax harmonization on overall economic growth and sectoral development. Special attention is paid to international trade in order to analyze if competitiveness concerns which have been forwarded in the context of energy taxation are valid. Furthermore, the effect on energy consumption and emissions and thus the contribution to the EU's climate change targets is analyzed.

Approaches to the Economics of Climate Change: A Survey of Literature

This paper is aimed at providing basic underlying principles in viewing the climate change paradigm, focusing on economic approaches necessary to analyze the issue. Economic approaches include market as well as non-market approaches. This distinction is deemed important as many efforts related to adaptation and mitigation to climate change often neglects the mechanism. Keywords: climate change, economic approaches, market approach, non-market approach

The Effects of Fuel Subsidy Removal on Input Costs of Productions: Leontief Input-Output Price Model

The study analyzes the impact of fuel subsidy removal policy on input costs of production sectors in Malaysia by applying the Input-output Price Model using Malaysia Input-output Table 2010. The elimination of subsidy on fuels such as RON95, RON97 and Diesel led to the increase in fuel prices by 32% on average. The increase in fuel prices led to an increase in production input costs for all 66 sectors, where the increase in the input costs of each sector exceeded the hike in fuel prices. There are 4 sectors whose production input costs are higher than the fuel subsidy removal policy namely fishing and aquaculture; transportation and storage; utilities; crops, animal production and hunting; and food products. Input-output price model application is an approach less commonly used in previous studies in Malaysia even though it is the most appropriate model for analyzing the impact of fuel subsidy removal on sectoral input costs. This study shows that the elimination of fuel subsidies has a major impact on the country's inflation and drastic global oil price changes can challenge the Malaysian economic sustainability

A Long-Run Estimation of Natural Gas Demand in Indonesian Manufacturing Sector: Computable General Equilibrium Model Approach

Domestic natural gas utilization in Indonesia suffers from lack of proper infrastructure and high transportation costs. The government might benefit from detailed estimation of demand to anticipate potentially fast-growing natural gas utilization in the future. Using Global Trade Analysis Project - Energy (GTAP-E) model simulation, this paper attempts to present a long-run estimation of natural gas demand in manufacturing sector for year 2025, 2030, and 2035. Chemical industry will remain the largest user of natural gas, followed by electricity, basic metal, and metal industry. To meet these demand, domestic production of natural gas should increase by 36.7 percent and 99.49 percent in 2025 and 2035, respectively. It brings us to the urge of massive investments in natural gas production and distribution

Challenges and Choices: Modelling New Zealand’s Long-term Fiscal Position

This working paper provides further detail on the modelling behind Challenges and Choices – New Zealand’s Long-Term Fiscal Statement, published on 29 October 2009. Building on the first Statement of 2006, we construct two main fiscal scenarios over a 40- year horizon. The historic trends scenario allows historic and current spending and revenue settings to interact with changing demography. The sustainable debt scenario applies a fiscal constraint on non-benefit spending so that Crown net debt follows the Government’s medium-term fiscal targets. The modelling innovations introduced this time do not alter the basic structure and principles of the Long-term Fiscal Model, but instead provide insights into government spending: public sector productivity growth and the growth of the basket of services each person receives. These innovations enable us to illustrate the effects of tradeoffs between broad spending categories in a constrained fiscal environment. In the 2009 Statement, these policy changes are combined into three possible scenarios for obtaining a sustainable fiscal position. The paper also illustrates the sensitivity of the fiscal position to small changes in the demographic, macroeconomic and fiscal modelling assumptions.Population, projections, social expenditure, fiscal costs, New Zealand