This thesis attempts to investigate the basic concepts on the relationship between the macroeconomic growth and the energy sector. This model consider in an explicit manner feedback effects of the energy sector upon the rest of the economy, and tries to render the future prospect of economic growth with binding energy situations and to evaluate energy sector policies in terms of their effects upon the rest of the economy.
There have been many of the partial equilibrium approaches on the energy sector, but the series of recent explosive energy cost jumps has created tendency to analyze the energy sector problems within the framework of the whole economy. In this regard, the general equilibrium approach is preferred as a methodology for the systematic investigation of various policy measures with respect to energy supply and demand.
The national economy is divided into production sector and final demand sector, and the former is further divided into energy production sector and non-energy production sector. Energy, as an intermediate factor input to the non-energy sector, has created some economic accounting problem. This study clarifies the accounting framework between the energy sector, the non-energy sector and the final demand sector. This allows the proper choice of input and output definitions, which in turn is subject to the production function representation. In an implicit manner, we allow the competition between the imported energy and the domestically produced energy, which is the typical case of Korean energy reality. This point is one of generalizations of this model from the well-known ETA-MACRO energy/economy model.
Main linkage between the energy and the non-energy sector is characterized by the elasticity of substitution between the energy and the non-energy (typically, labor and capital) inputs to the non-energy production sector. To implement this within the overall model, a CES production function is employed for the non-energy sector, and the activity analysis representation for the energy sector.
This model is expected to be useful in that the changes in the energy sector - primary energy price change such as oil price rise, primary energy supply limit, new energy technology developed, etc. - can be analyzed in policy perspective by way of sensitivity analyses.
