A Macroeconometric Energy Policy Simulation Model for the Philippines: Structural Analysis by Ronald Yacat

PhilippineInstitutefor DevelopmentStudies Working Paper 81-05 A MACROECO__C ENERGA'POLICY SIMAATION _DDEL FOR _ PHIL_PP.INES: ST_CT_AL ANALYSIS

by LEANDER

J. ALEJO

August 1981 PhilippineInstitutefor DevelopmentStudies

The views expressedin this study are those of the author and do do not necessarilyreflect those of the Institute.

A MACROECONOMETRIC ENERGY POLICY SIMULATION MODEL FOR _E PHILIPPINES_ STRUCTURAL ANALYSIS

INTRODUCTION Current successful because

planning

in terms of target-setting

of the seemingly

the formulation GNP growth because

targets,

include

energy

energy),

prescriptions

of the energy

and planning. recently

Development

is a model

factor

Inflation

revised

and the deficient

therefore,

cost-push

trade-offs

alternative

and policy

of the NEDA Five-Year

disturbance

capture

were

assumptions

is necessary,

have not been very

treatment

for policy

for example,

of unrealistic

_lat

implicit

of models

in the formulation

analyze

and policy-making

framework

used

Plan.

that will

explicitly

(price and availability

phenomena

in price

determination

target variables

and

significantly

variables

among different

and

implied

poliey.=egimes.

This paper

reports

the results

of an econometric

modeling

"-..,.

project

aimed at studying

Philippine

economy.

of the energy

crisls

and, relatedly, government policies)

energy_economy

Specifically_

it seeks

on macro-economic

may be used to evaluate

policy

reactions

to the energy

interactions

to quantify

variables

the impact

of policy

the effectiveness

(fiscal, monetary

crisis

in the

of the 1970's.

and balance Furthermore,

importance of of payments the model

- 2-

can serve as a planning forecasts

and policy

of the economy

experiments.

through

The model will

tool when

utilized

alternative

policy

then be useful

to make

ex ante

simulation

in answering

the following

questions_ I. energy

What

is the direction

crisis on the level

and its components: 2,

and growth

consumption,

By how much

crude oil prices

and magnitude

and at what

speed

How do wages

increases

respond

and/or

prices

affected

on employment

an energy

to resulting

price

domestic

exports

of adjustments

3,. What will be the impact price of energy

rate of gross

investment_

are domestic

of the effects

of the product

and imports?

by increases

do these

occur?

if the relative

supply

shortage

occurs?

increases

and with

how long

a lag? 4. affect

How will

the demand

to the GDP-energy 5,

increases

prices

of energy

for these products?

Accordingly,

ratio

of energy use)?

(or efficiency

W_..lat is the effect

payments,

in relative

governmea=

budget

of the energy deficit,

products

what would

happen

crisis on the balance

and the monetary

system

general? 6.

To what

or perhaps crisis?

In general_

economic

the inflatioanry

what mix of economic

the impact

of fiscal,

be analyzed

have past

even excerbated

in minimizing Impacts

extent

of energy

monetary,

counteracted

effect of the energy policies

disturbances

and-balance

as to their differential

policies

is most

effective

on the economy?

of payments

effectiveness

policies

have

in combatting

the

- '3-

present

and future

energy_-related

We shall later simulation

attempt

experiments

asssumptions,

with

economic

crises째

to answer these

the model

both historically

under

(ex post

questions

through

alternative

simulation)

policy

and in forecasts

(ex ante simulation). However, this papaer

we shall not attempt

for that will be the topic of another

we present

the estimated

underlying

theoretical

estimated useful

to do simulation

in its structural

underpinnings

parameters_

information

model

taken

paper.

recent

structural

Instead_

form and the

for the specifications.

as they are_ already

for analyzing

exercises

convey

The

a lot of

changes

in the

i/ economy

as compared_

perhaps_

with

We then_ enL_nerate the possible simulation possible

and conclude

aress

THE MODEL

The model

correlation

of earlier

uses ef the model

the paper with

a summary

models.-

for policy of findings

and

for i_rovement.

IN STRUCTURAL

statistically

estimates

FORM

consists

estimated applied

of 80 structural

using

on most

ordinary

equations.

equations

least These

squares

of which with

18 are

auto-

are ii0 variables

---

_IThese include the macromodel by Encarnacion, et al. [2]_ Narasimhan and Sabater _ and Bautista _i_ all of which used annual data up to 1969 only. A more recent macromodel by Villanueva /7] utilized semestral data from 1967-76 and focused on the Monetary sector.

-4-

80 endogenous observations

and 30 exogenous° from the first

of 1979 (20 observations). covers a relatively characterized externally imported

crude oil prices_

and .,._ changed

purposes_

sub-model

(38 equations)° degree

we have

economy rates,

led by spiralling political

a high

becuse

of the presence

divided

(42 equations)

The division

exists

environment

for two-way

of strong

the model

is not a rigid

linkage

interaetio_s.

into two

and ..-n macroeconomic

of simu.lta_aeity between

•)lease refer to the list of symbo_ subsequent

therefore,

for the Philippine

disturbances

semester

law administration°

an. energy

accounting

of estimation,

of the. p_zso:_high inflation

economic

For discussion

model

decade

of semestral

of 19'70 to the second

The period

by devaluation

under a martial

parts:

semester

unstable

generated

The data used consist

sub-

one as there

the two submodels

equations

in both

(In the following and the arrow

submodels

discussions,

diagrams

found

pages° )

Ene rgi_"__s _.Mo_e1 The energy _nd prices

within

sub-model

contains

a consistent

for this purpose.--2/ Consumption,

energy

the determinants accounting

of energy

framework

productien,, trade

flows

designed

and inventory

_./The accounting framework_ data b_!se_ and methodology for deriving energy flows in the Philippine economy as well as theoretical discussions on energy prices and actual d_ta computations are contained in separate papers available from the author upon request.

A _CROECONOMETRIC

E_,ER_Y POLICY

MODEL FOR THE PHILIPPINES_

(Estimation

Methods_

Part

Crude Petroleum (I)

(2)

= CE

and Refined

- PE

= 281o91584

= 0.96483 = 1,80725

(3)

= CE

(4)

= ME

- GE

- XE

Energy

Petroleum

Sub--Model

Products

+ 1,01140 PE (22.24327) rp

cp _2 DoW.

OLS and OLS with Autocorreiation Correction)

+ Alnv

SiM!_ATION

STRUCTUP_iL EQUATIONS

S_E,E, 0

= =

58,85175 0°66397

rp - BE

- g%nv

Pe (5)

= 774°25944

- 231.37450(--_P-_ L ) + 0_12351Y r (-io77527)

_2 = 0.92540 DoWo = 2.01513

(6)

(7)

CE Co = -189.02496

(9°67260) S.E.Eo 0

Coal and Hydro-geothermal

= =

(2.03061)

121o40701 0°330745

Power

= CE CO - PE CO P + 3.3.40527 (p--_---) + 0.00603 CO

(2°25612) _2 = 0°82767 DoW. = 1,50569

(8)

+ 83°22202

CEhg = PEhg

(7.69469) S.EoEo =

12o7074

Total System (9) CPE

Energy

+ CE co

(I0) CE'

CPE + GE

(ii) CE

CE _ -- LE

(12) CE _

Perp

+ C_ ng

CErp + Peco

Consumption

(13) CE_,u =

Consu_tion

Energy

in Consuming

0°86973

DoWo =

2.07567

° C_lg

Sector

Pe C - 354°11914 (--_-) + 0°09308 Y (-3° 23654) (9°].0279)

1385.8334

_ CEco + Peel

SoEoE,, = 0

106.59091 0°37417

(14) CECnel

1206,7609

= 315.95435

nel. (---p---)+ 0,08825

(-.3°63138) _2 = DoW,, =

0°91060 2°05846

(15) ,_EceI

Energy

CE C

Losses

SoEoEo 0

in Transformation

CE _ - CE C

(17) LE

Total

System

= 99°88461 = 0.158945

oEcnel

(16) LE T

(9. 77277)

- PE

Energy

Production

(13) PE

PErp + PEco + PEhg

(19) PPE

PEcp + PEco + PEhg

(20) ME

(21) ME*

($pme

Sector

+ _ME + ME rp co er) o ME

and Imports

Energy Prices (22) Perp

PPrp + ts + tsf + ed

(23) PPrp

0_07711

+ 0,71426

(_Pdcp

er) + 0,28568

(!7.24408) _2

PPrp -i

(6,27231)

0°99678

SoEoEo

0.01954

DoW° --- 2,046i3

(24) Sod.cp== $PCcp (25) pe (26) pe C

(I + tmcp)

(CE*/CE)

(pc

= (27) P_'nel

nez CEcnel Peel i o +

-0°01413

+ io09956 "

CEcel)/CEc

oR [ 'I'rp

_174°49739) _2

DoW. =

(28) Peel = _2

0.99941

S.E_Eo

io95_380

0_11!6

-- 0.,072895

-0o,46436 + 6,58941 Perp - 6,00206 (De (2° 10690) (-Io91251)

0°97779

D.Wo =

1o53376

S._E.E° =

(29) Spree =

($PCcp

0 _:!,Ecp + $PCr_

(30) Peco =

($pec0

o er o i'_co + Pdco

(31) Perp =

(Perp/O,25926)

I00

(32) Peco

(Peco/0O08728). __

i00

(33) Peel

(Peel/l.43299)

i00

(34) Pe

(pe/0o29558)

I00

(35) Pe C

(PEC/0,34930)

(36) Penel =

(Penel/O o26434 )

(37) $Pme =

($pme/o.o1695)

(38) Pine =

(SPree

ER)/IO0

o i00 I00 i00

Perp) + 3°87504 De (4.45855)

0_212_2

' l'_rp + SDc_co PEco)/CEco

MEco)/ME

Enerfff Efficiency (39)

(40)

EErp =

Energy

Y/CE

PErp/CEcp

Self-Sufficiency

(41)

(42)

EScp =

PPE/CE'

PEcp/CEcp

Part Iio

A_gr_ate (43)

Macroeconomic

Production

(Y') =

7.43677

0°88048

DoWo =

1.95568

.CE_ + 0°05339 (_)_+ 3.3!59! i_-) + 1 65733 t (2,28992) (B_O7BII) (3.82845) S.:E,,Eo= 7°22310

(44) Y

= Y'- ca

(45)

(CE*/Pe)

(46)

K I + I_i

(47)

Aggregate

Sub-Model

0_059715

100

Y)/100

Expenditures Z_

(48)

8559._29

+ 0_ 30835

(Y-T) + 34. 20700

(3.88119)

(49)

-2 R = DoWo =

0°91462 1.86851

(Cg*/Pcg)

(50) c

= c + c P

(3.30728) SoE.Eo 0

I00

(_C_)

= =

414_23524 0°58359

-9-

(51)

(Cp

PCp)/100

(52)

Y-

(53)

(Ig*/P I) o_ I00

(54)

I P

I-_ I g

C - X + _,_

Employment

and Wages

(55)

+ C g_

98o6,:;o,J86 +

_00204 Y (2.93331)

_9 R_

(56)

0_93755

DoW_ =

IOB1929

25°20401

0_98639

DoW. =

2 _ovon

W + 0°32205

(°-2_40759)

(3_86443)

SoEoEo = 3.07703 P + 0.13295

= 0°12115

P + 0.62206

(3°27490) _2

0.88565

W i

(5°40166) SoEoEo = 2°25219

Prices (57)

.... 313o69409

+ 0°11832

Pe C + g4o51352

(2. 80687) _2

03)

"(59)

0.97930

DoUo =

Io16420

(P -" P- i) o lOO P-I

Pcp

= -8.36oY7

(i. 78468)

+ 0.11255

Pe C + 0.83226

0°98882

S_E.Eo

D.W° =

1.93866

-49.77615

+ 0°07409 (2°41376)

w + 0°00121

(1.78716)

(60_, PCg

(2_9164 i)

S,EoEo = 7o88799

(3.54224) _2

log W + 0°00134

CPS

(3°56623)

= 4.93647 = 0_173775

Pe C + io02817 W + 0.41690 (2.32565)

(2.73154)

PCg-I

i0-

_2 = _,°_$0=

0°98813 2.82276

(61)

(Y* "

Money

and Interest

(62)

Z' _--

S ._i,E° TM 5,74524

C=°=-I X* + M*)

= 11,63232 - 4.61409

R + 0.00567

(-2.96679) _2 = DoW. =

I00

+ 22.99557

(8°65170)

0°97370 2o12518

$oEoE0 0

(2_66970)

De - 4.96257 (-io54060)

= 6,_9085 = 0,C542

(63)

Z ! + (CPS - CPS i) + (CGS - CGS !) + (NFA .- NFA_I) - (NOL - NOL i)

(64)

(Z + Z i)/2

Government

Revenues

(65)

CGS

....uGo_ _._I =

(66)

_= '_' '

(67)

Te*

(68)

Tne* =

TD* + Tlne*

(6_)

T!ue*

-56,042_0_

and Expenditures Cg* + Ig* "- T* -- _'=_

+ " _ tsf;

+ _ _mcp

04548 (2°51586)

(70)

i}, 2 = DoW° =

0,93991 1.87082

(T*/P)

Balance

NFA _- NF.A !

(72)

+ S:_4_'09_.T!ne* (2._09179) SoE_E0 p

I00

of_ Payments

(71)

_,.,_c 0 o ME ''_ " cp er ep)

-- X* ._ _!* + K_*

t._E_+ Mne_

= 473°56201 = ._,,210605

- iI-

(73)

ME*

(74)

l-_le*=

(Prone , t_e)/100

(75)

Me + Mne

(76)

(I_.*/Pine)

2352_째5435 + 0째09610

(7']) Mne

($pme o er) o !dE

I00

(4,11101) _2 = D_Wo =

0.92149 2oi776!

(78)

(er/6o 67105)

(79)

-- ($Px 째 ER)/100

(30)

Prone =

Y - !664.18237

(P_e)

(2.32911) SoEoE, = 279.57129 p = 0o19946

I00

($Prmne o ER) /i00

+ 11.37831 (4.86780)

12 --

DEFINITION

Endogenous

Variables

OF VARIABLES

(80):

total consumption

expenditures

at 1972 prices_

total consumption pesos

expenditures

at.current

value of total system energy in million pesos

total system energy consumption loss_ in !0 iU kilocalories

CE v

total system

CE *

value

CE C

energy consumption of consuming sector househoid)_ in i010 kiiocalories

CEce I

electrical energy kilocalories

CEcnel

n°n-eleg_rical! _• ,, m_-_iocalories energy consumptlon" of consuming

CE ¢o

consumption

of coal_

consumption

of crude petroleums

in 1010ki!ocalories

CF_g

consumption

of hydro-geothermal

enerzy_

government consumption million pesos

expenditures

consumption

petroleum

CGS

claims on the government in million pesos

private consumption pesos

total consumption

energy

consumption

in million

prices_

in million

at 1972 priees_

net of refinery

consumption_

pesos

fuel and

in i0 I0 kilocalories

of total system energy consumption net of refinery fuel and loss at current prices_ in million pesos

consumption

(industries

of consuming

and

sector_

in I0 I0

sector_

in !0

kiloealories

kilocalories

g CE

CPE

of refined

sector

expenditures

of primary

in i0I0

at 1972 prices_

products_

in i0 I0 kilocalories

of the monetary

at 1972 prices_

energy_

system_

in million

in I0 IQ kiloea/eries

- 13-

: _lacroeccnomio energy effici.:-:ncTj ratio_ GDP _er i0 I0 ki!oeaiories

EE rp

in.:_:_i!lion p_-sos of real

.'. petroleum refining efficiency ratio_ in 19I0 kiiocalories refined Fetroieum products per'l()I0 kiloealories of crude petroleum to dollar exchango

._peso

_ energy self-sufficiency energy production consumption

EScp

: crude petroleum self-sufficiency raLioi',in I0 I@ kilocalories " of crude petroleum production per i0 I0 kilocalories of orude petroleum consumption

GErp

_ consumption-production i0 I0 ki!ocalories

_ tot3!

investment

government investment pesos

I P

private investment pesos

1972 = I00

ratio_ in !0 I0 ki!ocalories of primary per i0 I0 kilocalories of system energy

gap in refined

expenditures

I g

stack

ra_e index;

at 1972 prices_

expenditures

at 1972 prices;

petroleum

products$

in million

at 1972 prices_

,..-qt 1972 prices_

pesos

ip.million

in million

_ capital

LErp

: refinery fuel a_d_.loss inc!udin_,. ._P_°dudti°n. _ of.non-.energy_. petroleum oy-products_i. _.n !0 _ mL,_ocalorles

LE T "

; _ota!

: total imports cf goods million pesos

and services

at 1972 prices_

_ total

and services

at current

_ energy

imports

_ energy

imports_

ME*

: energy

ir_ports at current

z-¢stem energy losses ].0I0 kilocalories

imports of goods million pescs

in million

pesos

• .__o_atzo sector_ in trar.s_ " - " n

at 1972 prices_

in million

pesos

in million

prices_

in I0 I0 kilocaiories prices_

pesos

- 14--

ME ME

• i_'_'_ports of coal'• in 10 I0 ki!ocalories ".-' imports

of crude petroleum;

Mne

: non-energy

imports

t_e*

,_non_,*energy imports

_ total employment

NFA

_.net foreign

: price index for gross

_ semestrM,

PC_

_ price

at 1972 prices;

in million

at curren-_ priees_

index_

assets

inflation

pesos

in million

_esos

1972 = i00

of the monetary domestic

fatal

system_

product;

in _nillion pesos

1972 = i00

in per cent

ind,_x for government

•pri..zeindex for private n

in i0 !0 kiloealories

consumption

cons._..a,)tz,,m

expend:itures_

1972 = i00

1.972 = I00

expenditures_

_ '_.riceindex for inw_,.stment ex_e:_3.itures_ 1972 = i00 I

._price index for total system enc_rgy ,',onsumptionnet of refinery fuel and loss:; 1.972 = I00

Pe G

• _ _or_o '.1t,1r - = ,,),_L . price index for ener_:y _ ,',n _-;-,-" ,_f consuming 1 .::,/__ = l',JO

P_ ¢0

:: price

Peel`

" price inde.x for electrical

Penn I

_ pri-_e index for non--electrical

: price index for refined 1972 = _q3 1_..v

ir_da:,:

f,_r

index

coal

"aonsu_'_ptian_

1972

= 100

e£>_-r!:sy consumption.; 19,72 = i00 en_r_y

pe_roieum

f,ar energy

sector;

eortsuTaption?,1972 = l:J0

pzoducts

consumption_

Pine

: peso price

SPree

:.'. dc_llar price

Pmne

_ peso •price index

for non--energy impc'_rtsi71972 = !00

• peso price

for exDortsi, 1972. = 1.00

_ totai system

_ weighted price of total system energy consumption net of refinery, fuel snd loss_ in millim_ pesos per i0 I0 ki!ocalories

index

energy

:i.'ap,)rte'_ 1972 = i00

f_-_reneray_ _.mpo_ ......... _,_._ } 1972 = I09

production;

in I:_3 ]0 ki!ocalories

-•,15.-

pe C

':weighted price of energy consumption of consuming in million pesos per i0 I0 kiloc__!ories

Peco

: weighted

Peel

: marginal price of electricity_ ki!ocaiories

Pene I

: weighted pr$,_e_of.. n°n-electricall _ per I0 klloca_ories

_ production of refined kilocal.ories

•price of eoa!_

in million

pesos

sector_

per !0 i0 kilocalories

in million

pesos

per

energy "•in million

i0I0

pesos I0

Perp

energy

petroleum

products i,in i0

weighted price of refined energy petroleum million pesos per I0 I0 kilocalories

PPE

_:total production

PPrp

::weizhted l_osted price (pre-tax) of refined energy petroleum products_ In pesos per i0 I'':,kl±ocalor!es

* d eP cp

of primary

products_

enerzy _ in !0 I0 kiloca!ories

_ duty paid landed cost of crude _:_trcleum imports_ dollars per i0I0 kilocalories

in million

Sp'_._

: weighted price of refined enerzv _et products l..ml.l_on d:-lars i_er .,J'_ kiloc_lories

_ weighted average interest per c_nt per _nnum

: total tax revenues

a_ i972 prices_: in million

: total

at current

Te*

: energy

The*

: non-energy

Tlne*

: non-energy indirect million pesos

_ money wage

: total exports of goods million pesos

:and services

: gross domestic

at 1972 prices_

tax revenues tax revenues

index

rat{-'-.: on de[_osit substitutes7

at current

tax revenues

prices$

at current

for unskilled

oesos

prices:; in million

tax reve_ues

product

imports_

in million

pesos pesos

prices._ in ..millionpesos

at current

labor_

prices.5 in

1972 = I00

_.t 1972 prices_

in million

pesos

- 16-

_ gross

domestic

product

:_-tcurrent

priees_

in million

z gross output'defined as grc)=;sdomestic product plus the real value of interm___diate energy input; in million

: total liquidity

_ average of beginning and end of the semester in million pesos

Exogenous Be

_t the end ,_f th'e _emester_

in._i!lion total

pesos

liquidity_

Vari,:_bles (30) :

â&#x20AC;˘ refitted ener_v,__etrole_L__ .. _ _roduct ...... _-used f_ in !0 I0 kiioeal_ries

pesos

_ government consumption â&#x20AC;˘million pesos

CPS

: claims on the _)rivate sector million pesos

_ se.._estraidu_y

,_dummy variable

_ equalization difference for {_fined energy petr._:_ieum products_ ln mlll_ou pesos per ,_0....:_!.iocal<_ries

_ peso to dollar

: net other sources of financing the fiscal deficit errors and orlissions_ in million pesos

I ,_ g

:.[overnment investment million pesos ep

Alnv rp Kf*

,_increase

at current

purposes_

Cg {=

Alnv

expenditures

bunkering

of the monetary

prices_

system_

vs_riab!e!'Ds '= ] 'for first semester 0 for second selnester fr_r energy

exchange

in crude

crisis

period_

rate,_ in pesos

expenditures

petroleum

De = i after 1973 = 0 1973 and before

per dollar

at current

including

priees_

inventory!_ in I0 I0 kilocalories

: increased :in refined energy in i0I0 kilocalories

petroleum

products

_ net foreign capital inflows in millio:_ pesos

including

errors

inventory_

and omissions_'_

- 17--

ME rp NOL

; imports of refined kiloc_lories _ net other

energy

liabilities

petroleum

products$

of the monetary

in 1010

system_

in million

pesos

SPnne

-_, dollar price

index of 'non-energy imports_

1972 = i00

SPx

_ doll,_.rpri,:e index

PE CO

_ Droduction

of coel_ in i0"I0 kiloca!ories

: production

of crude p_etroleu _ _[ ..... in I0

kiloc_lories

PE_ ng

" _roduction

of hydro_..geothermal energy_

in I0

$PCco

,', C_.IoFo dollar price of coal imports_ I0 I0 kilocalories

of exports ; 1972 = i00

kilocalories

in million

pesos

in million

_,es,osper

Pdco

price of do_,_:astica].!y produced !0 I0 ki!ocalories

Spc

C oloFo dollar price of crude r_etroleum imports_ dollars per lOii) ki].oca!ories

coa!j

per

in million

Sncr._ : (]oI,,F,, d,_ilar price of refined energy petroleum product._. _'_ imT_orts}, in million dollars per i0 I0 kilocalories TD*

_ tot_l direct

: time_ 1970 first

: import

tax rew_nues semester

duty on crude

_t curre_t

prices_

in mil.].ionpesos

= I

petro!_um _ in per cent

_ weighted specific tax on refined enerzv [_e, trole_,_ products ir_million pesos _er I0 I0 kiloc_lories

tsf

_ weighted sp{_cial fund tax on refined energy in m,illion pesos per I0I0 kiloca!ories

_ tot_{l exoorts of goods million pesos

: exports of refined kilo calories

and services

petroleu_m products_

at current

prices_ I0

energy

petroleum

produc=s_

:in I0

FI(_

CRUDEPETROLEUM, _D PE_LEUM PRODUCTS. IICOAL AND IHYDR(T_OrHERMA£ POWER

•

YIGURE II

TOTAL SYSTEM ,

ENERGY CONSUMPTION PRODUCTION AND TRADE

FIGUP, I_III

ENERGY PRICES

- 21 -

FIGURB IV

ENERGY .EFFICIENCY AND.SELF-SUFFICIENCY

22 -

FI_JR_ V

AGGREGATE. PRODUCTION & EXPEND]T URES

- 23 -

FIGURE VI

E.MPLOYMENT, WAGES AND PRICES

24-

FIGURE VII

,MONEYAND ,INTEREST

- 25 -

FIGURE VIII

GOVERIxlvlENT REVENUES AND EXPENDITURES

- 26 -

FIGURE IX

BALANCEOF PAYMENTS

- 2_--

relation

is given in equation

The marginal

crude input requirement

_CE aPE

(2) (_Ii units

= io0114

-while

the computed

in I0 I0 kiiocalories).

of o,etroleu_ refineries

e!atieity

for 1979 (second

rp _C_'_

.... P._rrj) ....... i_ a (_'_c.p_ '_" = _PE-_ " CErP := 0oO_._ rp cp

semester)

Production

of refined

of crude petroleum consumed

petroleum

(eqn. 17) because

by refineries,

(eqno (17))o (as defined

The'energy

conversion

of non-energy

efficiency

in eqn., (40)) raay also be derived

From this we

.....

than the consumption

of transforv._atior_losses,

and production

PE EE

:products is less

energy

by-products

of _etroleum fro:_ eqno

refineries

(2) as follows_

278.73822 CE cD

rp = 0Â°98373 cp

can isLfer that,

over

time_ EE

iznproves as CE

bEE increases_

_, 278.73822>

cLT-C-E cP

Production in eqno

equal

CEc _ 2

of refined

products

petroleum

inventory

products

accumulation

a policy

total

(,.,E ; and net supply rp"

to net imports

sidered

petroleura ,nroducts..(PEr_ _), _

(3) as the .difference between

petroleum â&#x20AC;˘ refined

(GErp) .

less bunker of refined

instrument.

is deta_,_ined

cousu_nption of refined

fro?.;other

sources

GErp is _ie._.In_d :,-,_.. _ in eqno

sales

and inventory

petroleum

products

change.

(4) .as Again,

can be con-

- 29

Eqn.

(5) gives the d_mand

as a function

of its real price

and a seasonal demand

dummy

for refined

over time although

(Ds).

indicating

the increasin$

te_ns

to -0.i00

petroleum

/P), _n activity

elasticity

in the first

as compared

variable

_stimates

has become mere it is still

semester

show

(CE

products_

(GDF) elasticity

on the other hand,'is

semester

1979) o

Ministry

of Energy_s

consumption) disparity

This

as well

estimate official

very price

(Y)

that

inelastic,

of 1979

as an energy

as an earlier

in the estimation_

energy)_

data which

we utilized

high cost energy changed

for refined

unitary

conser-

lower

of about

estimate

extends

semestral

the Ministry

by Gonzalo. _/ The in the time period

of Energy

even to the 1960_s data for the more

and conservation

that

than the

1.5 (for petroleum

to the difference

%_ile

petroleum

(0.973 in second

is substantially estimate

could be attributed

used annual

almost

and Gonzalo

(an era of cheap recent period

could have

significantly

this parameter. A semestral

semester

intercept

consumption

dummy(Ds)

of refined

is also

petroleum

found

products

Ministr#

of Energy

/4/ and Gonzaio

to shift

by a hefty

83.22 x i0 I0 kiloealories.

_Isee

)

of 1973 (pre--energ7 crisis)

_f prices

of demand

elastic

in the first semester

importance

products

tool. Income

used

(PE

products

in absolute

was -0o04_

vation

for refined

Price

petroleum

Its price elasticity

131.

first

- 30

Coal and Hydro_eotherma! the domestic inventory

Power째

Coal imports

coal consumption-production

data or actual

data are really

apparent

gap.

consumption

figures_

consumption

derived

(eqn.

(6)) fill

For lack of coal our co_l consumption implicitly

from

4/ production

and trade

Domestic

demand

to the reciprocal (eqn, (7)).

figures.for coal was

of its real pric_

In this particular

raore price inelastic semester

values

of -_00663_ implying

alternativ_

(3.495 in the second coal

elasticity another

determined inventory

for coal_

semester

is becoming

denand

_!asticity

product for coal becomes estimate

to its elasticity

far

at mean

iT_portanee of coal as an

on the other hand_

of 1979 and 5.506

less income

elastic_

high

is very high

at the means). its current

indicatin_

income

its potential

source,

An _iternative

electricity

compared

the _rowing

is still substantially

energy

domestic

cource.

Income elasticity

Although

and gross

Its price

of i979 is -0.248

energy

to be significantly

specification,

over time.

second

found

whose

commercial

consumption

production

level

chan_e nor trade

_nergy

so:urea is hydro-geothermal

(CEhg) we just equate (PEhg).

For obvious

in hydro-geothermal

4--/Asimilar concept of apparent data is used by the U.N. See /6/.

to an exogenously

reasons

POw_=.

consumption

there

is no

Production

_pplied

to energy

- 3!-

hydro-geothermal considering

can be treated

the governmentts

Total

System Energj

alternative mcst

electricity

concepts

hydro-.geothe_al

Consumption.

of the economy's

con_non way is to define

energy

inputs

electricity would

inventory in eqno

change

consumption

of refined

Stili_

of CE _ is given in eqn. definition

refinery

losses

.- (ii) define

three

consumption.

The

a better

(GE

of primary

alte_lative

including

refining

a third

(Ii) and is really

and production

in eqn.

defines

and (4)),

energy

all losses

and electricity

definition

of total energy

trade

definition

CE r in effect

in both petroleum

refinery

However;

sectors

program.

coal and hydro-geothermal

a more comprehensive

by all consuming

and transmission.

development

of consumption

petroieur_ products

these refinements.

transformation

policy--influenced

this for consulnption from net energy

(i0)_ CE '_provides

incorporating

(9)째

total energy

petroleum_

as given in eqn,

power

Eqns.

it in terms

(CPE of crude

be to adjust

as partly

(CE)which

in energy generation

is variant

a post-petroleum

consumvtion

since

of energy by-products

it excludes (LE

in eqn째 rD

(17))o proved

As can be seen to be the most

later_

CE* in eqn.

(12) values

individual

enersy _roducts Consumption

of households

therefore_

excludes

three

variable

function.

consists

these

significant

production

Energy

_nong

consumption

Sector.

and the non-energy

petroleum

in the economy's CE in te_s

and their

in Consuming

refineries

definitions,

CE aggregate

respective

prices.

The consuming

producing

sector

industries.

and electrical

utilities

It,

which are classified

under

broadly

dividend energy

for_s:

electrical

consumption relatively

consists

estimate

demand

mor_

of -0.176.

as given in eqno

values

Consumption the difference electrical

function

products

(13), (14),

in 1979

into two energy

and a

c_f electrical

These

for electrical

expressed

(26),

the income

elasticity

=, (CEce I Y) ,

1979

of total energy

(15)o

sector

-1452,76034

is given =

0_00483

and non-

It c_n be shown from

( Y ) CEce I

elasticity

sector can b_

Peei/P =

and

(second

(33), and (35) that the price

(p)

sector

of -0.151

by the consuming

energy by the consuming

elasticity

is close

by the consuming

Peel e (CEce!,

with an

respectively.

its consumption

(15)_

(second semester)

semester)

cot!Dare with

energy

as _iven by eqn.

is given

(second semester).

energy

and 0째955

sector

on the other handj

_ mean _riee

of 0_324,

of -0.204

in 1973

in !979 (_econd

elasticity_

(14) imp!ie_

between

energy

for the consuming

of non-electrical

of demand

while

sector

Non-electrical

petroleum

elasticity

elastic

of 0.912

income elasticity

semester)

energy.

of refined

Income

a value

Consumption

eqns.

mainly

The iml)lied price

beco_ing

to unity with

mean

by the consuming

We h_ve

small share of coal.

(!3).

is -0.084

consumption

transforn.Lation sector.

and non-electrical

Total energy in eqno

the energy

(_)

The computed consumption

for second

respectively_ estimates

semester

compared

with

price

refined

petroleum

than other secondary strong

their

electrical compared

energy

price

and,

by-products

(LE_) is derived

is, energy

responses.

elasticity

Cons_nption income

Total

and production

in eqno

very of

inelastic

for non-electrical

Bector.

by the

times higher

solicits

seen to be quite

transmission

1973

energy

is several

therefore,

in _ransformation

losses in conversion_

semester

This could be explained

and conservation

Losses

second

to non-electrical

of electricity

is> however,

for electricity

for electrical

compared

products).

to the .almost unitary

Energy

respective

Demand

products

substitution

elasticity

of 1979 is ,-,0.356and 0,487,

responsive

fact that tile absolute

and income

of --0.358 and 0.538o

therefore_ (mainly

price

.J.O

energy.

system energy

of non--energy

(16) as the difference

between

total system sumption

energy

consumption

(CE _) and productive

of the consuming: (non-ener_Ty proaucln_) _ " " sector

LE T would thus consist and electrical

petroleum

of energy

utilities째

on oil refinery

losses

products

Total System

Eqno

losses

in transforming

of refined

petroleum

definition_

in both petroleum

crude

petroleum

con-

(CEC) 째

(17), on the other hand,

refineries focuses

into refined

(LErp)_ Energy

Production

total posto.-refinery energy production

This

energy

products,

however_

would

and Imports.

Eqn.

(18) defines

as the sum of the production

coal and hydro-geothermal include

e, substantial

power째

input

.... 34 -

imported

crude oil used

total system energy energy

sources

production

(PPE) as given

(_fE) is simply and

(eqno 20).

terms as in eqn.

in eqns.

prices

pprp= the wholesale

of refined

posted

instead

price

difference

duty-paid

($Pdc)

and the exchange

rate

the resultant

oil firms and _overnment's

of PPrp with

price

than pro-energy

This

respective!y_

and

into

and the tax components fund contribution The. _re-tax

Wholesale

(23) to be behaviorally

is very

important

'behavior (including

relation

lags) of both

price--_ettinB.

Implied

• or) in 1t_79 (second

' _ run and z_(_iS_ in the long run,

(second

cost of crude petroleum

resF_ect to ($Pdcp

crisis

F_etroleum

is decomposed

in eqn.

institutional

is 0._' ,m_ in the short

0.532 and 0.744_

of r_fined

landed

(_r)=

industry

_':_roducts at the

the d___aler_smark-up

(ed).

is postulated

to th_,_so-called

higher

in peso

of r_tail or pump prices_

(pro-tax),

semester)

products

of data constraints,

taxes,(t s)_ the sDeciel

on the ether hand_

elasticity

petroleum

in the petroleum

pesos/lO I0 kilocalories)

of specific

that captures

indigenous

energy imports

refined

petroleum

(22) the price

(tsf) _ and the equalization price_

Total

Because

data used do not include

(in million

consisting

(!9),

mechanism

(22) - (24)°

charges°'- In eqn.

products

only primary

This can also be expreseed

!_w:_l (ex-Pandacan)_

such the price freight

in eqn°

The pricing

to measure

wholesale

to include

=_'huswe can redefine

(21).

_Prices.

decided

PErp 0

the sum of crude petroleum,

coal imports

is summarlzad

in producing

semester

and implying

!973) values

an increasing

response

- 35 -

of domestic cost.

of petroleum

The equation

adjustment with

prices

with

also

a mean

approximately

during

the current

petroleum, _$PCcp) t .

Eqn°

landed

is defined

.valorem

tariff

price

of PPrp felt

cost of crude

as the dollar C.I.F°

on crude petroleum

price • SDCcp).

(tmcp

(24).

losses)

the average

consumed

price

In first semester

price

by the entire

(peC) as a weighted

(both per

?,rice charged of electrical

(net of oil

(pc) while

to the consuming

eqn,

about P].68

million_

energy,

million

and

respectively,

(26)

s_ctor

and non-electrical

I0I0 kiiocaiories)_

and P0.29

of energy

_conomy

1979, pe and ge C were

Co only _0.24 million

eompae_d

in first

1970.

Non-ei_ctrlcl_y petroleum

Computed

The duty-paid

posted

or 2°4 months,

period.

e_ergy

refined

domestic

response

gives the effective

semester

a rapid

duty--paid landed

lag of only 0040 sesmesters

(25) defines

_2.04 million

to the

71°4 per cent of total

the -ad

as seen in eqn.

refinery

indicates

for our purpose_

plus

products

price

_roducts

elasticity

(_e _j is related " D,e_

(Perp),

at the means

its main

to the price

component

of P'-nel with

(eqn.

respect

of (27)).

to Perp

1.016o

Likewise, of refined eiectricity variable

electricity

petroleum

products,

vroduction

for the energy

came out significant.

price

these being

(eqn. 28 ). crisis

(peel) is determined

A slope

period

The slope

the major

by the price

input

and intercept

(De = 1 after

dur_ny variable

to dumbly

i_739 0 otherwise)

drastically

reduced

- 36 -

the coefficient

of pe

shifted

by 3.875.

respect

to Perp were

from 6,589

The resulting

and 0,233 in second

to 0.587 while

_ "_ e_astl .... y estimates

i.376 in second semester

1979

values

price-setting

of government

granting because

rate increases of the strong

Eqn, imports

as a weighted Eqns.

reflects

pressure

(30) gives

average

crisis).

despite

dollar

the effective

actual

This

in reluctantly spiralling

oil prices

consumers° import

price

of energy

domestic

price

of coal

produced e_rgy

crisis)

the institutional

fro_ electricity

of domestically

(31) - (38) transforms

energy

authorities

the effective

of Peel with

1973 (pre-energy

perhaps

in electricity

(29) defines

while eqn°

semester

(during

drop in the elasticity behavior

the intercept

and i_orted

prices

coalo

into indices

(1972 = i00) 0

Energy

Efficienc_

energy

efficiency

energy

input

increasing measures

and Self-

i_ defined

(eq_. (39))°

from the onset

are _dcpted.

in the petroleu_

efficiency

as refined

petroleum

input°

as gross

Ratios.

domestic

A i_riori we would of the energy

Eqn,

conversion

Sufficiency

production

expect

crisis

Macroeconomic per unit of

this to be

as conservation

(40) focuses

on the efficiency

refineries.

Here we define

petroleum

products

Historicaliy_

output

of energy

energy

per unit of crude

this ratio has also been

improving

as was shcwn previously° Energy

self-sufficiency

can be measured

indigenous

Droduction

of primary

energy

(inclusive

of losses)

of the economy

by the ratio between

and total energy

as in eqn.

(4i),

consumption

Self-sufficiency

'_" 37

in crude petroie_n domestic

alone can also be neasured

production

consumption

of crude

petroleum

as the ratio

to total

crude

petroleum

(eqn. (42)).

Macroeconomic_Sub-Mode! The macroeconomie that links the energy general

equilibriu_

aggregate supply balance

variables

in nature

production

and demand_

sub-model

provides

with

framework

econo_nic variables.

and contains

and expenditures,

govern_ent

an integrating

equation

wage

revenues

It is

blocks

for

rates and prices,

and expenditures_

money

and the

of payments째 In view

economy,

of the constraint

tha model

imposed

is constructed

by energy

with a basically

inputs on the supply-determined

framework.

Aggregat_ production

Production째

function

which

to scale production

capital

(K) and energy

output

fuuction

(CE),

with

and a shift

three

energy,

necessitates

from a value added

concept

(returns

intermediate

energy

however,

with national

input

(Y_) defined (Ca) as given

is not Y' but Y or GDP

income

accounting.

inputs, (t).

of a constant namely_

to include

labor

The inclusion

a redefinition

to primary

in eqn.

aggregate

version

Parameter

input_

as GDP (Y) to gross output

supply,

(43) is a _edified

is really a !inearized

returns

of an intermediate

Eqn.

factors)

such

the real value

(45).

Aggregate

(eqn. _44) in conformity

(N)_

3_-

We couLJ rawrite

eqno

(43) in the following

yv = (7,,43677 + io65788 from which we could readily factor

t) N + 0°05339

infer

the narginal

fo_:

K + 3.31591 CE product

of each

input _ --- = 7°43677 + 1.65788 _N

8v _ _-_ = 0,05339

= 3.31591

8CE

The marginal over timeo capital

stock relative

to around

of labor

_Lhlo _° seems plausible

capital-ouput

ratio from

abouC

productivity

Ho_ever;

per unit of e_ployment

is necessar 7 to have an auxillary adjusting figures)

available

NCSO

to approxiL_ate semestral

transformation OLS:

equations

linking

N' _---67!.56150 _2 = 0.83449

0LSAC_"

N' = i!60o_0240 _2 = 0..64467

basis)

of actual

growth

in the

in the 1950's employment

data

we have used the Central to compute

(instead equation

employment

rapid

By an increase

6.0 (semestral

In the absence

index for No

the more

as evidenced

(call thi_: N __ in thousands)

employment

is seen _o be i_ereasing

considering

to labor

9.0 at present°

by semester Bank

productivity

data

for the marginal

of per index

linking

point)_

N' and No

After

(mostly May and October

average_

we came out with

rough

N _ and N° + 124o97484 N (9.31185) D.W° = io!2114 _ 109.58311 N (5.64291) D°W, = !°46:_,81

p-- 0°43943

- 39 -

Using

the second

the marginal

equation

productivity

(with autocorrelaCion

per unit

of labor

correction)

can be computed

follows_ _Y'

_Y_

7.43677

= The computed

marginal

productivity

is F741 per year at constant prices째

'l_nisis also

ivity

This

finding

prices째

semester

or about _1,918

1979

in current

supply

mechanism

marginal

produc.t-

than the actual wage

our contention

that wages are set not by labor

wi_h

for second

The current

lower

supports

but by some institutional

at the rate of _30 per year in

of labor is substantially

present째

of labor

1972 prices

increasing

real terms or P78 in current

+ 1.65788

i09o 58311

in a later

and demand

responding

section

considerations

to price

movements

some lago The computed

per semester re_son_ble r_turno _3_3!

marginal

productivity

or about Ii.0 per cent per annum

estimate

However,

million

when

compared

the marginal

to actually

productivity

per i0 !0 ki!ocalories

price of energy

(Pio68 million

second

semester

indicating

Eqn. transforms

when

1979)_

compared

rcal GDP into current

(compounded) prevailing

twice

seems rates

input

that energy

of capital terms_

of about

the observed

per 1.0I0 kilocalories

to its contribution

(4_) is our definition

of 5.3 per cent

of enerEy

is almost

actual

underpriced

of capital

is still

relatively

_o output. stock while

eqno

(47)

- 40-

Aggregate

Expenditures.

is quite uaique

in that aside

variable)

which

from disposable

used as a proxy

need not be determined accumulated

The consumption

wealth

by current

and savings.

(Pcp) was used as the deflator equation_ sectors

Z _ provides

while

increases

P Cp

of energy

to consume

prices

to our definition

income°

S_condly,

explanation

Real _overnment the exogenously

in eqns°

(Pcg).

sub-model

In this

via the effect marginal

(Y-T) which

propensity

and can be attributtd,

firstly_

is an overestimate

it also includes

corporate variable

(Cg) is determined value Fiscal

in eqno

of government planners

terms, hence

Total

deflator

captures

of consumption°

current

in nominal

variable.

real and current

consumption

estimate

C _ instead

(49)

of C

consumption

revenues is treated are defined

(50) and (51), respectively°

Total accounting current

index

(Z').

of the liquid wealth

consumption

given

(Cg*) and its price

as a policy

income_

the presence

significant

and expenditures

income

but also from

the real and the monetary

The computed

small

(48)

(a flow

consumption

liquidity

the energy

of disposable

aside from personal

from

of total

in eqno

Consumption

income

The personal

on _ _Cp °

because_

a very

disposable

of 0°31 is relatively

income

for total wealth.

one link between

links with

function

real iDvestment

identity

government

and real government

in eqno

is determined (52)_

investment investment

from

the national

As in government

(ig*) is taken

incoTne

consumption_

os policy-determined

is found by deflating

I * with g

its

- 4! -

price index (Pi) difference

(eqno (53).

between

Private

total, investment

investment

(Ip) is then nhe

and >_overnment investment

(eqn.(54))° Employment labor denand wage

rate

1979o

-0.938

wage

their eiastieity and 0.600

level

For wage behavior_ rate either

through

for price.

we postulate

In eqn.

order

to estimate

wage

elasticities period)

(computed

elasticity

estimated_

Wages,

Ceteri_

semester

paribus, times

mean

before

in second impact

1979 being

prices

the growth

an insti.tutionall_" set wage

labor's

purchasing

lagged

(56), a simple

reaction

or collective

to price

power°

indexation Koyck

with

respect

The net

pattern

lag of 1.646 even one-half

therefore_, are not only

also lag signifi_ant!Y 4 behind

semesters

increases.

In terms _ short

to prices

implies

of the full we_e inelastica!ly prices°

lag is introduced

for see_ond semester 1979),

of wages

bargaining

in of

run (first

,_f 0.232

or only 37°8 per cent of the long run e!as_iviEy

The computed i0 mon=hs

0°650

for second

legislation

is seen to be an incomplete to prices.

GDP (or Y),

is to be maintained°

mini_au_ wage

wages

(55)),

N is seen to have

b_ing

one and one-half

agreem-_nts aimed at regaining effect

variable_

(eqn.

seen to have a stronger

estimates

to Brow by about

_ages if employment

is also

equation

(P) o

to Y, its elasticity

Nominal

for wage

would have

of an activity

(W) and the GOP deflator

response

than _rice

In our empol_nent

(N) is a function

index

inelastic semester

and Wage s.

is of 0o615o

that it takes about response

adjusted

is felto

to prices but

- 42--

Prices째 explanation energy

the rapid growth lation with

sector=

of money

factors

came out more energy

losses)_

(57) is a mixed are embodied

and the wage

domestic

supply

(eqn.

in recent

energy

index

price

used_

crude

in policy-controlled

consumption

energ?

imports Eqns.

as well

(56) and

(57) jointly

wages

res_ect

to energy price_

elasticity

be attributed compared_

eqn째

of prices

tz, the relatively

the particul_r

significance

time as primary

respect

for 1979 are higher to energy

price

of prices with

r,.zspective!yo

expense

to _ag_s

The rela-

can probably

in the cost of production,

of wage

increases

for inflation.

and money

(log.W)

and monetary

than the mean

(0.214)

for second

sharz_ of the wage bill

for ener_y price

determinants

rate_

liquidity

_,_ithrespect

importance

(inclusive

a f_edbac|_ mechanism

elasticities

higher

_quation

and tariffs

fom_: of the wage variable

(57) shows a d_ciining

estimates

exhibit

wag as and domestic

for _'.xample_ to energy

increasing over

Computed

for the

oil _)rices but also changes

19-79 are ,_,267, _J.326, and 0_28__

tively high

However_

and prices째

corre-

Pe C represents

_s mow:zments in the exchange

between

semester

in energy

index

for the _conomy

not only price mov:_ments in imported taxes

_$e also

and its high

in the price

and was therefor_

in the

(g _) , considering

years

significantly

price

r,_te (W).

liquidity

Pec_ the effective

than Pc, the effective of transformation

(Pec)

variable_

prices,_

equation

Cost push

index: variable

a monetary

consuming

level

for inflation.

price

include

The price

and an

expansion

The elasticity

elasticities

supply

with

(0.228) but

-43_

elasticity

with

valua of 0.542.

respect Eqn,

to wages

(5_) com_utes

(p) in terms of the GDP deflator Consumer consumption

prices,

sector

credits

because

of its direct

pressures respect

on cons_er

effect

(Pcg) i_ eqn_

and wages

months°

price

we chose

estim_te_

to variable

and hence,

demand

of PCp with

1979 are 0,247_

is done for the deflator _e do not include

0°464

is seen with

a mean

la B of 0o71

be explained

of labor

elasticity

for first

a monetary

variable

in energy

semesters

or 4°3

by the fact that most of Cg

services

semester

for government

of PCg to changes

hawe been sho_nl to be slow in responding

whose

wages_

in particular,

to _)rice increases. 1979 is 0.437

while

Computed !ongrun

is 1.0_6,

In order not to overdetermine investment

(PI) is derived

investment

expenditures

of money

residually

the system_

supply

Rate°

the deflator

from the ratio

and real investment

iloney and Interest definition

for personal

to energy

However,

semester

A slow reaction

are _overr_aezlt purchases

elasticity

linked

_pending

Elasticity

(60).

This can probably

shortrun

rates

respectivf_ly.

in the specification° prices

inflation

(CPS) as our monetary

on consumer

prices°

A Koyck lag formation consumption

(W) o

sector

to Pec, W_ and CPS in second

and 0_323_

by the deflator

(Pc_) is similarly

to the private

from its mean

(P) 0

(PcC) and wages

include

a decline

for the semestral

as represents

expenditures

the consuming

exhibited

between

expenditures

in this model,

(cor_nonly referred

we adopt

for current

(eqn.

(61)).

the broad

to as M 3) or domestic

. 44 -_-

liquidity period

(our ?,)o Eqn째

to period

changes

in the monetary private

sector

i-c._ money

(CPS) is assumed

Central

(CGS),)and

Bank monetary

n_t foreign

hand_ we hawa (semestral

balance)

is specified

du_.,_yv_riab!e crisis period 1979).

elasticity

credits

to the

_hrough

the

are endogenous o[ pay_ents

as given

(e.q,.no (62), on the orher

of period

respect

seneste:

demand

interest

du_,._ny variable

a structural semester

shift

to the interest However,

of i_276 at the _egns

rate

by the

1974 to second

Money

rate

(in

(Ds) and

implied

specifica-_ion constrains

_o P to unity_

1979) o

_o Z _

Money

of the effective

(Y)_ _-_seasonal

that captures

balance)

in eq._l,(64).

as a function

_,,_ith respect

to GDP with a value

the

de_and

is seen to

(-0.306 at the means,

it is elastic and 1.239

with

respect

in second

1979_

Eqnso

(62) a[id (64) (together

liquidity

Government fiscal

equation

This _articular

,_-0o2.'34 in second

domestic

as found

Cr.edits to the government

(NFA) _ however,

(De = i from first

of Z _ with

be inelastic

semester

Domestic

in the fisc_:l_and baiance

Z (b_ginning

(R), gross do,nestle product

semester

Bank.

tools째

assets

for money

redefined

awerage

real terms)

energy

and its components

respe_ctiveiy.

In the de,and

another

supply

accounting

to be policy-controlled

to the model and are determined equations,

a simplified

survey of th_-_Central

sector

traditional

(63) presents

deficit

with

(63)) jointly

(Z _ or Z) and the interest

Revenues

and Expenditures째

as the difference

between

solve

for

rate

(R) o

Eqn.

(65) defines

current

government

the

expenditures sources

(Cg* + Ig_) and re-venue fron_ taxes

(F*)o

increase

Any fiscal

(decrease)

the change

(66).

consumption

and an ad valorem

cP_cp° _ . er) o

edged°

_,_nileit .-.-La_; a _irect effect

thus, overall

effect,

however_

direc-t taxes

on increasing

end hence_ through

is further

(TD*)_ a fiscal

(Tlne*)o

indirect

deficit_

taxes

A behavioral

policy

slow respo,.iseof Tlne*

why persistent expenditures

fiscal

have been

money

(tsf)

(CErp) petroleum

energy

tool,

prices

impact

supply°

and

through

Its net

_i_',lu!ationof the mode].° (68) into

and non-_,-nergy indirect

or almost

deficits

GPP _nd lagged Tlne*

elasticities

1.067 for second

value of 0.965 semesters

fund

equ-ation i_ fo,r_ulated for non-energy

Short end long-run

to ¥* of 0.54,] and relatively

of crude

decompose,d in eqn,

taxes to be a •function of current

(eqno (69)),_

(Tne*)

The impact of ,2nergy taxes is double-

can only be known

Non-energy

taxes

petroeiu_n products

r_rices_ it a13o h_-.san anti.-inflationary

of th_ fiscal

taxes

for total _ner_y ....

relation

tax (tmcp). a;_plied on the value

(MEcp

system.

taxes, we have divided

tax (ts) and special

of refined

imports

reduction

of _nergy

specific

as an

(CGS -- CL,_ i_ " ,

ta::es (Te*) and non-energy

to include

on energy

of the monetary

In e_n_. (67), an institutional

taxes is specified applied

sector

the impact

total energy

will

_eqn., (_3), through

to _he government

In order to anal_ee

in eqn,

(surplus)

in monev_ supply

in claims

total taxes into

deficit

(T*) and other

semester

respect

1979 are exhibited°

to Y* is ssen from its mean lag six months_

have exhibited

outstripping

of Tlne* with

revenues

This may well explain in the past.

because

Government

of a longer

lag

--- 46 --,

of revenue inflation

coiieccions

or i,_come gro_,_th,

Eqn, value

comp._red to exl___-,-ndit_res in response

(70) transforms

current

tax revenues

(T*) i[ito real

(T) o

Balance defined

of Paymentao

in eqn.

X _ and

account

assets

energy

This

exo_enously

while

Current

e_argy

current

(73) and (74)_ respectively.

(76) defines

proxied

is rel._.te_l to n.n activity

of non-energ7

GDP a_.d export

liquidity, is decomposed

non.-energy i_.ports

variable

price

index i_ports

are terms

and non-energy

components.

imports,

Y_ relative

(P_ne/'i _) and e foreig;1 exchange

by the ex_._ortprice

The mean elasticities prices_

imports

reel e_Lergy im_,_orteo Keel non-energy

priÂ˘e of _-m-energyiaports

in a change

In real value

Eqno

account

and non-_energy imports

(75) a!sc_ de.co_._posesi_.ports into energy

variable

on current

of domestic

eqn.

the other hand_

surplus

is reflected

import:_ (_:_) and current

(!,k_e*)in eqn., (72), given in eqnso

(K_*)o

(NFA - _,F_,_.!) component

Kf* are treated

into current

of payments

(71) as the sum of the surplus

, - M*) and capit_i X:: in net foreign

The balance

constraint

(Fx) as in eq__:_(77). with

respect

to relative

index are --0,3i]_ C',.554and 0,347_

respectively. in eqn_

(78) _;e tra.nsfor_rL the peso to dollar exchange

(a policy variable) (80) are definitional energy through

into its index equations

import -orice indices the exchange

-for_zo Finaily_

linking

respectively

rate indexÂ°

the dollar _ith

their

eqns. export

rate

(79) and and non-

peso equivalents

- 4/ --

USES OF THE MODEL FOR POLICY

The complete simultaneous iterative stabie_

model

system

computer

various

aigorithmo

simulation

variables째 be performed

change

in dollar

is dynamically

can be performed

with

it.

the costs

in the past in terms

of losses

investment

paths

and other

resulting

'Faese marginal

to the assumed

require

that the model

;_with_: and _'without__ simulations

and the two dynamic

(e.g_, increases

would

nonlinear

to quantify

employment,

can be compared.

attributed

Assu_ing

crisis

as a dynamic

solution

one may be interested

product,

Simple

whose

experiments

of the energy

gross domestic

variable

can be described

of equations

For example_ the economy

SIMULATION

CoI.._ v. price

of the model

can

for e.ach endogenous

differences

in the energy

target

can then be

crisis

of imported

variable

oil_ $PCcp

i_ our model.)o An interesting simulation performed we would

ques=ion

of the model_ better

however,

is whether

had an alternative

try to simulate

lower energy

that can be ana!vzed

tax rates

(CGS - CGS 1 = 9), a tightening

sector

(CPS) or money

supply

(or) or any combination

been more appropriately Another exploration

of credits

in general, of policy

implemented

interesting

program

performance

issue

a further

instruments

could

have

implemented째 given,

(ts_ tsf and tmcp in the model)_

budget

peso

the economy

policy mix been

the economy's

by historical

Thus,

for instance,

a balanced

to the private devaluation

of the

which

h&ve

could

in the past_

is to know

and the hydro-geothermal

the impact power

of the oil

development

program

had these been

domestic

production

to have higher and simulate

designed

to total

the most

to Gounteract

primary

useful

energy

cost of energy _md possible

changes

We could

then assume

po_r

consumption

scenario

versus

of payments

of the model

future

(PEhg)

in the past

would

policy regimes

can be simulated

a moderate

price

the affect

of enrgy

through

(e.g., high scenario)

monett_ry_ fiscal

policy째

_ssess_uents and revisions

of the NEDA

Five-Year

Dew_!ooment

Plan would

find _articular

use for such simulation

experiments

especially

wilen projecti_g

internally

the accounting

and beh_vioral

The simulation many

possible

be in

in the non-controllable

future, scenarios

ways of _inimizing

Future

application

of alternative

adverse

Alternative

and balance

earlier_

of oil (PEep) and hydro--geothermai

and 6valuation

variables째

much

the imp_,icton the economy.

However, short-term

initiated

(in

s_nse} macro_cono[,_ic w_riables.

axalnpies just outlined

apo!ications

consistent

of the model_

_ra but a few of the

Jependinf_ on the

purpose

of the user.

CONCLUS IONS In this paper_ w_e have construct

a macroeconometric

and the advantage We have

tried

Co _how that it is possible

model

with an e_o!icit

of such an approach

to incorporat_

,_nergy sector

to pl._nning a policy

in the model

quite a number

evaluation.

of fiscal,

- 49 -

monetary,

balance

of payments

can be manipulated

equations

?olicy

instruments

that

in practice,

The estimates that significant

and energy

of the structural

changes

equations

in parameter

confirm, our hypothesis

values

of the behavioral

have occurred, therefore_. justifying

tile construction

a new model° We have significant

sho,zn that with

lagged variables

dummy variables long-run

the use of recent

as well

are appropriately

elasticities_

seasonal

semestral

as seasonal,

introduced.,

slope

Hence

and structural

data,

and intercept

short-run

and

shifts may be

estimated_ We have tried to show also that consistent prices

semestral

from various

it is ;_ossible to construct

energy

data on consu_ption_

sources

and how these might

production

trade

and

link _._iththe macro-.

economy ,, The model demand

can

into demand

be extended

for speqific

demand by households sector_

production

functions°

consumption

however_

stock°

would

Fortunately,

is a highly

stock and can, therefore_ capital

refined

c_isaggregating

serve

energy

petro!e_._'m products°

and industri_:_ can also be done°

industrial

energy

by further

require

estimating

Modelin_ sectoral

it is well established

correlated as a proxy

variable variable

Sectoral

with

that

capital

for sectoral

each

DAT_ USED

IN _IE MODEL

f._

_ •0

i.:_.4

Ocel

oho'_

u_O

e,_ o"_

"-_ O,l

o'_ ¢,'_

oO ¢,'_

o"1 o"_

o')o"1

P'_ o'_

",1"0

o",

O',O4

- 51-

O_,D

o"1 o'_

,:l-

e,,t P'_

_D "-._"

I,,_'_l,.,f'_

o.l t,'_

L-P$t,.l"_

c'_l_

c_r--

Lt_

P'.- r',-

u_ _"_

,._ u'_

Oe,l

_ o_ _0 r".,,,

,.,1"'.,1"

..i"t-..

".-._P _,._"l

u'_r_

P-- u_ _0, '_")

o'_ ,4li"

r-- ,-.-_

',,_ '.-._"

o'_ -..'t

0 _1_ ',,,0 ',,0

,_,..._" ".-.'.'.'.'.'.'.'_ ",..'l"',,,.,'_

r-- O_ ,-.,,1"-,,.1"

•

_t3 .._-

_..._

CO m0"_ -_

e.£_,-.4

'-,,,_",,:_

[_o_

-_I"r-_","10_

0 0

r-. ,-i

L'_")_'_'" )

.-4-,,1"

cO 0 o"_ _'_

0 0 O0

c_;

_<;

_..4

_00

L"v'PI_'_"1

cxl ,-_ t",,,I e,,_

0 0

r-,. p-.

-,1"_ ,'--,_,,-',_

0 0 <.9,0

_ -.1O0

0 0

T'_ u"_

_.="

_ _

o.._ 0 0

_ ........._

0 0

O0 I"-..

O0 _

.... i-| -

0 0

0"3 I"_

O0 O0

_ _

...._

0 0

L._O0

0 0 O0 _

_ _

C-_ 0

_"3 C_ 0 0

T'_. P_

O0 O0

_ _

C_ 0

0 0

_0 .-..1-

0 0 O0

0 0

O0 O0

0 0

0 0 ,-_ r'-',.

0 0 O0 _

..... |_I

_;_

_.' _'_

0 0 O0

I--I

u'3 ,.-4

O0 O0

_,_,_

0 0 O0

cq _

l--I -

_;_,;

_,,_ -_

F--I

.J_

0 0 _

F-4

....

t,_ t"4 _ o_l

CO0

O O

,--40

O O (T'_O

._1"C_ I_- c¢_

I'_. ¢_

O O

(:_ O

,"_

O O

Or---.:I-o4

,-'._ _D

O O

,-_ o*_

cOoO _:_ bt_

O O

-.el" r_.

O O

c',.l cr_ _DOO

,,I_) t¢'_

¢e_ ._I" _

t'_00

o'_r_

O O

Oo-.I

O O

C._ O

-_-Ir.r-. ,-_

c"q P_.

t_l Lt_

O O

...t _'NI t'_I_--

CO I"_

c,_ ¢_I ,-40

_,-._

r...,_

O O

- 52 -

OC)

O _

o. O

_ ...Ir'_

_._ 00

O O

O O C3 O

C_, O

0 O

m_O0 OO

0 0 OO

0 C_b OO

,._ I"--

C) O

(D 0 OO

la_ t_

O O

0 0 OO

OD P_

O O

C,_ O

0 C) OO

0% C,'l

O O

-.*I'

0 O

CO O'_

O C';

Q'_

0 O

I_',_ O,1

O O

CO _I

0 0 OO

-_D _-D

0"_ 0

I"_

_ i.-I H

--4 o4

,-4

t-4 _4 I._i

C_, Ch

,.,-4 oq

r-_

o,_ ¢"-J

I--4 I-.4 _-)

,--4

0 O

F.-; _,'-I t-,4

_,t

/'_ C:O

_-_

,-'.4

i-I t...4 _

_-4

_'_

I-_ h--I _

_-I

I-,I I.-4

I_*

I-4 _ I-4

$--,.1 t',,-I i--I

_._ _

,'-_

I_,,

CO CO (_.--),0 ........

I.-4

cJ (.0

_-I

t_1

C'_ 0

0 0

U'_

C) 0

_0 ,..0

0 0 C_ 0

_-0 _

0 0 C'_ C3

_:3 ,_,,-

0(,_ C30

X.O

0 C'b

e._ c,_

r--- 09

k.o 0

oO GO

,- 53 -

C_ C._

cv"_

0 C)

0 C'_ C) C>

_,_

0 C'_

<J" LFI

v,o _,,'_

0 6

0 0

r'.,,

:,_

x.O O;

I"--.

Q'_

-._

lZ] Cxl

CO I-_-,

Og O

-. _54 O O

C3 O

O O

'7.:, O

c30 O {:D

OC.>. O C

t._ I_ I I

I,,D C3 _, {D

cxl i

,tt_ &"3 _ C,

_.:.j, O .,_,. O

{DO O O

.,,4 I

,_ i

]

?,-II

Cxl I

¢,h ¢"-1

_t_OO _.D

O O

_-I Cq

*"_

O O c.J c0

O _

(.3 _ _'_ _

O ¢,3 '4.3 _

e,'D O r-,,,, r.--

Cs C_ .:J- r--.

O O r,.. cO

O C> ,--r} C_

O O _,t r----

O O dD ko

O o4

C_ tD

_/"1 _--_

',..D

,.3"_c-4

(.'9 ,*.4

t,h _

I'_

_.0 o,3

'.,,tD,,--i

cO ,...-t,-

CD r-.,.

;,D

c,,i 03

t.r', c-..+

r-.,..,,e,h

t,q ,.:.t+

.+_.J- ,.4,.o ,4 +..; d..:_

¢-4 _

o4 _

c;,_,-.i ,.,-,,...i +4,.,-; d,-4 _

,t,'h

_+4 _+._ _0

_4o"

k.O kD

_}" -_j"

0 0 0

_++

b*_l Lt_

0 0 O

".-.1"'--:I'

,4 _

,4d

"--.1"I._

0 0 0 cD

P'-,.-oO

-.1" ".,.I'

_ 0 C.J; O 0 0 O

r'---+

-...1""-.i+"

+,4o: d,-_

C2, 0 +_; 0 (D 0 I"-,. 'ir_

".._"

B+-4 _.,;+_,.4...:..,+; ,-:_ _

0 (D C> 0 Cb O Oh 03

,-..1"b_

..+" ._o+ l/'_l .4.2-

0 0 ,.=b0 C') C_ C'h u"_

_'_ _'_-

0 C, 0 0 t._ O cr_ O

_ C, C') (",4

"-,..1"

0 0 0 _

0 (_ C) _._ cb C.:* -.'1- _'

"Q_

"_,_"

C,' 0 0 0 0 0 C3

0 0 0

0 0 ¢'D _

_ (%

¢_ C,_

0"4

I_- ,_

(,b ¢'3

_1" C.O

--:i .+..3

u_ u_

u'_ Lr_

,...,4 t',l

I",, _+"h

V'} u'h

_L_ kO

+.t'h _/'_

,,-,4 --..1"

,-+1 t,'_

(S',t;_

_tD

r---. _..)

+.J', <:..t"

+J:',-, d,.,":

,_.,-+ .4,+

Ox _.0 uh I"--. kr_ 0

.......

j_.>

r+"+

_Z I-'4 0

,--4 --,,'-- +,.+_ ,'.-,=.", ,:.,_d d c;

+_ _

¢._'j ¢'xl

;:_30_

_T ,-.:t+

CO oh

C') _'_

q,? C, ¢_h C'r,

t'_

.u_ +4t

¢'_ c'_

+,+_

_,+'_.._

_."_ ".+:T

c,'_ _O

-.I+ _0

,.q+"

c:,_:.o o"3 +,-_ o.'-; ,.._ <,'+ _,'+ ,-,4 e_ r'--. ,,.._" _

. CD _'

r-+,'. c_ ',,.O ,.,'N

t'C+ _

.+,..i,.+o,:+ ,.t_ p.-.

r--

",,O -.,1"

_ N

_'_ '+D

-; +:.;

,,,I" c,,,l _

_N,,_

,,--I _

CD 0

.,...1'-u'h

C> 0

r'O

_._

r1-.

O',

_.,-,

C.., (+:+

:.-;+_ ,.,,+_ ,-+o

C_ C'..,

_u.',

C_ _-D

+,, +_,,-4 4.-_:

-..1- (.,'0

C'__

@_ 04

I'_ I--I

C.;', ,-4

--..1"_T

_ _F_ _.

,[;, I'-

o,3 _ u-_ _

{'_ _

C-q c'q

_,¢'_,_ ....I" _

u"i CJ:*

-.I" _

_=t o'_

c_ _D

[rl

l-4

,-4 _

¢'q

i-4 _q l,--I

I'-_I

P4 P-I h'-i

I...4 I-,4 l'-'_l I'-4 +,'-4I--4

i--4 P4 p-+-!

"_4" p-._

i-.I i-'4 B'-I

l.--I I+.I I-4

+."_ _

i-4 I"-4 l'+_l

i'--+ I-,4

e.,.', P"_

r +-+ _

_,.'_ p-,

,43 I1",,,

CD r_

,+"'1 _'_

G', VJ