Evaluation of the economic impact of electricity prices change (Azerbaijan case)

Abstract

This paper has examined the impact of electricity tariff changes to other economic sectors, as well as to potential changes of price levels in the overall economy. In this regard, the authors have applied the Inter-Industry Balance Model and its modification, i.e. Equilibrium Price Multiplier Model. The authors have also empirically built the inter-industry balance and equilibrium price models for the case of Azerbaijan’s economy, and conducted analysis and assessments for this case. The inter-industry balance tables of production and distribution of products and services, officially published by the State Statistical Committee of the Republic of Azerbaijan, were taken as the primary database for this study. It should be noted that the inter-industry balance model for Azerbaijan was built based on 96 sectors of the economy. The model was used to assess the economic impact of electricity price changes in the national economy. Finally, simulations relevant to 10, 20 and 30 percent increase of electricity prices were conducted and potential impacts to Azerbaijan’s economy were assessed. The obtained results were analyzed and summarized.