The Impact of Imported Energy and Goods Prices on Growth and Trade Balance of a Small Open Economy

Year 2017, Volume: 2 Issue: 2, 99 - 116, 30.06.2017

Wei-Bin Zhang

https://doi.org/10.25229/beta.286304

Abstract

This study
builds a growth model of a small open economy with imported energy and goods in
a perfectly competitive economy. The economy is composed of one industrial sector
and one service sector. The economy is endowed with constant labor and land. The
growth mechanism is basically neoclassical in the sense that the main
determinant of growth is endogenous wealth. This study is mainly concerned with
the effects of changes in capital cost, energy price and price of imported
goods on trade balance, price of services, land rent, and path of economic growth.
The comparative dynamic analysis provides some insights into the impact of exogenous
shocks on the national economy.

Keywords

price of energy, price of imported goods, growth

References

• Backus, D.K. and Crucini, M.J. (2000) Oil Prices and the Terms of Trade. Journal of International Economics 50, 185-213.