On Energy Imports and Short-Term Prospects of the Turkish Economy: A CGE Analysis

Abstract

This paper develops a multi-sectoral computable general equilibrium (CGE) model of the Turkish economy, calibrated to 2003 base-year data to scan 2003-2008. The model treats the energy sector independently as in Celasun (1986), who presented an influential, multi-sector computable general equilibrium (CGE) model of the Turkish economy. The data set used in this paper, captures the energy-sector items that are the most relevant in the energy-import bill of the Turkish economy. Utilizing the data set and the model constructed, the paper presents the results of two experiments. The first experiment simulates an environment where the recent increases in the energy price levels continue into the near future. The second experiment limits the amount of foreign capital inflows, while keeping the increase in the world energy prices. The results illustrate the importance of the energy sector in production activities of the model economy and the significance of the availability of foreign savings that soften the negative effects of the rising energy prices on the economy.