Reda Cherif, Fuad Hasanov, Aditya Pande, Mr. Ray Brooks, and Mr. Ralph Chami
commonly anticipated scenario for cars. However, it need not be so substantial to have a major impact on the oil market. Oil today is far more dependent on transportation than coal was in 1910 or 1930. While nearly 62 percent of oil use in the Organization for Economic Co-operation and Development (OECD) countries involves cars, trains, boats, and planes ( OPEC 2015 ), coal consumption a century ago was only 20 percent reliant on the transport sector—mainly steamships and rail ( De Stercke 2014 ).
Figure 5: Motor Vehicles vs. Horses (USA)
Note: Electric car graph
Recent technological developments and past technology transitions suggest that the world
could be on the verge of a profound shift in transportation technology. The return of the electric
car and its adoption, like that of the motor vehicle in place of horses in early 20th century,
could cut oil consumption substantially in the coming decades. Our analysis suggests that oil
as the main fuel for transportation could have a much shorter life span left than commonly
assumed. In the fast adoption scenario, oil prices could converge to the level of coal prices,
about $15 per barrel in 2015 prices by the early 2040s. In this possible future, oil could become
the new coal.
incentive to assign socially optimal seniority s W to the wholesale financier, corresponding to the “bright side” of wholesale funding. All points above that line satisfy ΔΠ B < 0 so that the bank has the incentive to assign too high seniority s = 1 to wholesale funds, corresponding to the “dark side.”
The other lines represent additional parameter restrictions used in the model. Line 2 is θ> θ W s=1 (existence of inefficient liquidations; indistinguishable from line 1 in the middle graph). Line 3 is θ<θ * (early liquidations based on noisy signals are not
Banks increasingly use short-term wholesale funds to supplement traditional retail deposits. Existing literature mainly points to the "bright side" of wholesale funding: sophisticated financiers can monitor banks, disciplining bad but refinancing good ones. This paper models a "dark side" of wholesale funding. In an environment with a costless but noisy public signal on bank project quality, short-term wholesale financiers have lower incentives to conduct costly monitoring, and instead may withdraw based on negative public signals, triggering inefficient liquidations. Comparative statics suggest that such distortions of incentives are smaller when public signals are less relevant and project liquidation costs are higher, e.g., when banks hold mostly relationship-based small business loans.
Sources: IMF staff estimates and projections.
Note: The figure illustrates the relationship between fiscal adjustment and changes in sovereign credit default swap (CDS) spreads based on a regression estimated for 31 advanced economies. It is based on a representative country with a debt-to-GDP ratio of 100 percent, a primary deficit of 3.5 percent of GDP and annual GDP, growth of 1.5 percent. Each graphline represents the relationship between adjustment and spreads based on a different assumption about the multiplier for spending (that is, the impact of discretionary