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- Title
An amplification mechanism in a model of energy.
- Authors
Kormilitsina, Anna
- Abstract
This paper investigates a propagation mechanism of the energy price shock in a model where capital utilization is associated with costly energy consumption. Endogenous depreciation is an important element of the model, as it has been shown to produce a significant negative effect of energy prices on output. I show that the amplifying effect of endogenous depreciation is determined by the choice of the functional form and calibration strategy for the energy cost function. My estimates of the energy cost function allow to conclude that the energy price shock has only a moderate effect on output in this model, while endogenous depreciation mitigates rather than amplifies the effect of the energy price shock.
- Subjects
UNITED States gross domestic product; MACROECONOMICS; ENERGY industries &; the economy; DEPRECIATION; INVESTMENTS
- Publication
Canadian Journal of Economics, 2016, Vol 49, Issue 4, p1425
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/caje.12239