Oil Dependence and Economic Instability
AbstractWe show that dependence on foreign energy can increase economic instability by raising the likelihood of equilibrium indeterminacy, hence making fluctuations driven by self-fulfilling expectations easier to occur. This is demonstrated in a standard neoclassical growth model. Calibration exercises, based on the estimated share of imported energy in production for several countries, show that the degree of reliance on foreign energy for many countries can easily make an otherwise determinate and stable economy indeterminate and unstable.
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Bibliographic InfoPaper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 3/2007.
Date of creation: 2007
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Other versions of this item:
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-28 (All new papers)
- NEP-DGE-2007-01-28 (Dynamic General Equilibrium)
- NEP-ENE-2007-01-28 (Energy Economics)
- NEP-MAC-2007-01-28 (Macroeconomics)
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