Full Title: Macroeconomic Modeling and Energy Subsidy Reform Policy Dialogue: Recent Experience, Insights, and Perspectives
Author(s): Dominique Njinkeu, Calvin Sebaze Djiofack, Defne Gencer, Lulit Mitik Beyene, and Mosuru Olukayode Alli
Publisher(s): World Bank Group
Publication Date: December 11, 2023
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Description (excerpt):
The report explores modeling approaches, designs, and impacts of computable general equilibrium (CGE) modeling exercises carried out for energy subsidy reforms in different country settings. The report reviews approaches used as part of operational and analytical engagements supported by the World Bank, including those funded by ESMAP, as well as activities by other institutions. The review considers four main dimensions: (1) energy subsidy reform context and challenges, (2) transmission channels covered by the model, (3) data collection and consolidation process, and (4) key model parameters, including calibration of shocks, choice of elasticities, and others.
The review explores the ways in which CGE models were adapted for the situations in which they were used, and how they informed energy subsidy reform design and implementation, paying attention to the drivers, impacts, and lessons from the use of these models. Finally, the report offers insights, conclusions, and considerations for future work on CGE modeling supporting energy subsidy reform, with attention to the choice of approach, data availability, and capacity needs for effective modeling that can render analytical results that are useful for policy engagements. Given the strong case for using CGE in energy subsidy reform engagements, the report draws practical insights and lessons for future work.