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Trade Shoks and Aggregate Fluctuations in an Oil-Exporting Economy

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Author Info
Francisco J. Sáez (Departamento de Economía Cuantitativa, Universidad Complutense de Madrid, Campus de Somosaguas)
Luis A. Puch () (Departamento de Economía Cuantitativa, Universidad Complutense de Madrid, Campus de Somosaguas)

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Abstract

In this paper we analyze the role of trade shocks in shaping aggregate fluctuations in Venezuela from 1950 to 1995. To this end a stochastic general equilibrium model of a small open economy whose main productive activity rests in the exports of a single basic product is specified. Shocks to the terms of trade which are directly associated to oil price changes are modelled as a foreign transfer. We find that this approach gives predictions that are consistent with the time series properties of Venezuela when i) the income efect of consumption more than compensates the substitution effect that generates the oil transfer and, ii) there is imperfect capital mobility. In particular, our model specification captures the observed patterns of the main aggregates after the oil resource boom of 1974.

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Paper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales in its series Documentos del Instituto Complutense de Análisis Económico with number 0301.

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Date of creation: 2003
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Handle: RePEc:ucm:doicae:0301

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  3. Mendoza, Enrique G, 1995. "The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 101-37, February. [Downloadable!] (restricted)
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  7. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  8. Kose, M. Ayhan & Riezman, Raymond, 2001. "Trade shocks and macroeconomic fluctuations in Africa," Journal of Development Economics, Elsevier, vol. 65(1), pages 55-80, June. [Downloadable!] (restricted)
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  9. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June. [Downloadable!] (restricted)
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  1. Bety Agnany & Amaia Iza, 2008. "Growth in an oil abundant economy: The case of Venezuela," ThE Papers 08/18, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
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