Akihiro Amano

A small forecasting model of the world oil market

Abstract An annual, small-scale econometric model of the world oil market was developed to analyze oil market conditions and oil prices for the period 1986–1991. The model determines the oil price by a market-clearing condition, given world economic activity and the strategic supply behavior of the OPEC core countries. The effects of OPEC production cut in 1987 upon oil prices are evaluated, and alternative oil price profiles are provided. A simulation experiment suggests that if the OPEC core is pressed to defend the OPEC share in oil supply, then wide price swings may become inevitable.

Comparative exchange rate simulations

The 1983 Fall Meeting of the Project LINK was held at the time of the tenth anniversary of the commencement of the generalized floating rate regime. It might be debatable whether one should celebrate the birth of this regime or mourn over the death of the Bretton Woods system, but no one would disagree with the view that we shall have to live together with this ten-year old neighbor for some years to come so that we should learn more about the temper of this temperamental system. At the 1982 LINK meeting, one special session was devoted to an investigation of alternative methods of modeling capital flows and exchange rates [see Klein and Krelle (1983)]. During the meeting a plan evolved to organize a comparative study among multi-country or world models that have incorporated exchange rate determination mechanisms. Originally, the Federal Reserve Board Multi-Country Model, the World Economic Model of the Economic Planning Agency (Japan) and the LINK system itself had been planned to participate, but in an early stage of preparation the OECD INTERLINK also joined the group with its latest attempt to endogenize exchange rates among major currencies. In what follows the first four papers report on the methods of endogenizing exchange rates in the framework of multilaterally linked models. They also report on the simulation results designed to facilitate comparisons among alternative approaches. The final paper discusses major similarities and differences of the simulation experiments. Each model. of course has its own history of exchange-rate modeling. An early attempt in FED-MCM can be found in Bemer et al. (1977), which was based on the structural balance of payments approach. Due to difficulties in obtaining stable equation estimates for international capital transactions, among other reasons, a shift has been made to a single-equation method

STABILITY CONDITIONS IN THE REAL AND MONETARY MODELS OF INTERNATIONAL TRADE

Publisher Summary This chapter discusses the stability conditions in the real and monetary models of international trade. International trade theorists have developed two sets of instruments: one to analyze the real aspects of international trade flows and the other to resolve the problems of international monetary systems. In the real model of international trade between two countries, it is well known that the stability of trading equilibrium requires the sum of the elasticities of offer curves to be greater than unity. The elasticity criterion in the real model is a necessary condition for stability in the monetary model under the variable exchange-rate system, provided that the marginal propensity to hoard is less than unity. It is difficult to find a real trade model corresponding to the fixed exchange-rate system in which imbalances of international payments can take place. The asset effect will worsen or improve the terms of trade depending on whether the sum of the marginal propensities to import in the two countries is less than or greater than unity.

Energy prices and CO2 emissions in the 1990s

Abstract The world oil market conditions in the 1990s are examined by means of an annual econometric model incorporating strategic behavior of OPEC. It is found that growing world consumption and the rising share of OPEC in production will put the OPEC in a position of being able to raise oil prices substantially sometime in the middle of this decade. Only slow growth in world output and/or intensive energy conservation efforts will make it possible to postpone the tightening of world oil market conditions to the next century. An energy consumption/CO 2 emission model is then constructed to examine the possibility of stabilizing CO 2 emissions at around the current level of reducing it by 20 percent under this oil price scenario. Energy savings that will result from rising real energy prices and continuing improvements in energy-saving technologies will probably stabilize the emission levels in developed countries, but total world emissions will continue to grow. A 30 percent tax on fossil fuels, together with more intensive energy-saving efforts, can reduce the emission level by 20 percent by the year 2000 in developed countries, but again other parts of the world will be forced to cut their economic activities substantially to meet the target. This clearly indicates the need for a global approach rather than a country-by-country approach to effectively tackle the problem of excessive emission of CO 2 .

Latin American Debt: Macroeconomic Environment and Economic Structure

By using an econometric model of the Latin American region as a whole, the external and domestic factors that have an important bearing on the enduring debt problem in this region have been identified. External factors such as high interest rates, low commodity prices, and sluggish growth of the world economy are found to be important. Capital flight has also been a serious aggravating factor. However, the domestic economic structure characterized by inward—looking development policies and low marginal propensity to save has probably been as important as external factors. Simulation experiments in the projection period suggest that various forms of debt-relief plans cannot be considered to provide final solutions as long as the present economic structure of this region remains unchanged.