Economy-Wide And Distributional Impacts Of An Oil Price Shock On The South African Economy [book]

B. Essama-Nssah, Delfin S. Go, Marna Kearney, Vijdan Korman, Sherman Robinson, Karen Thierfelder
2007 Policy Research Working Papers  
As crude oil prices reach new highs, there is a renewed concern about how external shocks will affect growth and poverty in developing countries and how this effect should be modeled and anticipated. The links between the two aspects-macroeconomics and poverty/income distribution-surely have become a major focus of economic research and modeling in recent years. 1 However, the main challenge has been the reconciliation of potentially very detailed and large information sets from
more » ... modeling of individual or household behaviors about income and employment opportunities with the more aggregative behavior in a macroeconomic model. A promising approach for researchers is to employ computable general equilibrium (CGE) modeling as a meso framework because CGE models generate from macroeconomic changes a set of consistent relative prices, wages, and profits at the sectoral level that provides the vital sources and changes of household incomes and expenditures for further analysis of poverty impact and income distribution (see figure 12.1). There have been several ways of utilizing CGE models and household analysis to establish the links between macroeconomic changes and poverty analysis, depending on the level of simplification and the level of information retained for both macroeconomic and microeconomic components. At one end of the spectrum, where data constraints and technical capacity of policy analysts are issues, the "123PRSP Model" in Devarajan and Go (2003) simplifies CHAPTER 12
doi:10.1596/1813-9450-4354 fatcat:drtp6xq735gm5kosnmjnlqfmmm