Macro-Economic Impact of Price Shocks Originating from the Infrastructure Industries (an Exercise in Macro-Econometric Modelling)

Abstract

This thesis examined the various macroeconomic consequences of the steep hikes in the prices of infrastructure inputs - the critical intermediate goods in the economy. For this purpose, eight infrastructure inputs, namely, Coal inclusive of Lignite, Crude Petroleum and Natural Gas, Petroleum Products, Fertilisers, Cement, Iron and Steel. Electricity and Railway Transport Services were considered and studied for the implications of sharp increases in their prices over the period 1970-71 through 1994-95. Given the thrust of this work on the macro aspects, a composite price index of these eight infrastructure inputs (with weights in terms of the value added from the National Accounts Statistics) was constructed to study the implications of their price behaviour. The basis for this work was the observation that the economic impact of sudden and steep increases in the prices of these infrastructure inputs was all pervasive and they were considered as one of the causes of the periodic down swing of economic activity, experienced at various points of time.