Energy Prices and Firms’ Economic Performance in Emerging Countries

The relationship between energy price dynamics and competitiveness is crucial in the transition to environmental and economic sustainability. On the one hand, rising energy prices may induce process innovations and increase mark ups, thereby intensifying competitiveness. On the other hand, higher prices are expected to reduce competitiveness, because firms bear short-run costs that can partially be transferred to consumers. In emerging economies, where sectors and firms are less mature and more vulnerable to external shocks, require special attention in light of global development challenges. This paper evaluates the direct and indirect impact of energy prices on firms’ economic performance for 11 developing countries over the period 2002–2013. The empirical analysis reveals that higher energy prices generally do not harm economic performance and may actually reinforce it in some cases. The scope and direction of this effect, however, depends on the firm’s energy intensity