This paper develops a three-sector dynamic general equilibrium model of Dutch Disease for an oil-exporting small open economy. Agricultural, manufacturing and nontradable goods are distinguished. Sectoral capital stock adjusts gradually. Spiral or monotone adjustment paths occur depending on the typology of the economy. A more developed oil exporter could experience spiral adjustments; the short-run and long-run sectoral effects of an oil shock are qualitatively different. A less developed oil exporter would experience monotone adjustments; the short-run and long-run sectoral effects of an oil shock are qualitatively similar. The model developed can be applied to any "small" open economy adjusting to external revenues and terms of trade shocks.
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Paper provided by Yale - Economic Growth Center in its series Papers with number
760.
Find related papers by JEL classification: C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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