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As the world economic power shifts from the advanced G7 countries--Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States--to the seven largest emerging market countries (EM7)--Brazil, China, India, Indonesia, Mexico, Russia, and Turkey--the vulnerability of these emerging market countries to exogenous shocks is becoming of growing importance. This paper presents a comprehensive examination of the effects of oil price shocks on real economic activity in the EM7 economies in the context of two classes of empirical models. In general, we find that oil price uncertainty has statistically significant effects on the real output of the EM7 economies and that the relationship between oil prices and economic activity is in general symmetric. We also find that oil price uncertainty has in general a negative effect on world crude oil production. Keywords: Emerging markets, Oil price uncertainty, GARCH-in-Mean VAR, 1. INTRODUCTION The seven largest emerging market economies (henceforth EM7)--Brazil, China, India, Indonesia, Mexico, Russia, and Turkey--could be double the size of their advanced counterparts, the G7--Canada, France, Germany, Italy, [...]

This paper uses neoclassical microeconomic theory to investigate the demand for energy and interfuel substitution in India at the sectoral level. It makes full use of the relevant economic theory and econometrics and generates inference in terms of Allen and Morishima elasticities of substitution that are internally consistent with the data and nonlinear models used. The results indicate that the interfuel substitution elasticities are consistently below unity in the household and power sectors, revealing the limited ability to substitute between major energy commodities in these two sectors. However, significant substitution relationships are found in the industrial and transportation sectors, suggesting that energy price changes in these sectors will significantly shift the demand for energy and consumption. Based on measured elasticities of substitution, we also discuss implications of energy price shocks on inflation and inflation targeting strategies by the central bank. [ABSTRACT FROM AUTHOR]