title: Oil and the world economy: some possible futures.
abstract: This paper, using a six-region dynamic stochastic general equilibrium model of the world economy, assesses the output and current account implications of permanent oil supply shocks hitting the world economy. 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, output growth could drop significantly. Also, oil prices could become so high that smooth adjustment, as assumed in the model, may become very difficult.
authors.affiliation: International Monetary Fund, Research Department, Suite 11B-338, 1900 Pennsylvania Avenue NW, Washington, DC 20431, USA.
authors.forename: Michael
authors.initials: M
authors.lastname: Kumhof
authors.forename: Dirk
authors.initials: D
authors.lastname: Muir
keywords: Hubbert's peak; exhaustible resources; externalities; fossil fuels; oil depletion