TITLE:
Exposure to Energy Risk in an Energy-Based Growth Model
AUTHORS:
Didier Darcet, Etienne de Malherbe
KEYWORDS:
Production, Growth, Energy, Energy Efficiency, Energy Price Index, Ex-Energy Price Index
JOURNAL NAME:
Theoretical Economics Letters,
Vol.14 No.4,
August
29,
2024
ABSTRACT: The note introduces a simple GDP accounting model, whereby the total GDP at a point in time is the sum of the various GDP sectors contributing to the production of added value. Among these sectors, the energy contribution takes a special place. Energy is viewed as the primary contributing one and the other sectors are treated as secondary, whose production derives from and are dependent on the energy production. The link between energy and the secondary production is established in a simple yet realistic linear-exponential manner, allowing for energy efficiency to be taken care of. In particular, an energy efficiency rate is introduced and translates the ability for example to output more secondary added value with as much primary energy input. The model could thereby be used to measure the sensitivity of the GDP growth to sudden changes in the primary energy prices or volumes.