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Sustainable growth and financial markets in a natural resource-rich country

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  • Hooper, Emma

Abstract

This paper studies the optimal growth path of a natural resource-rich country, which can borrow from international financial markets. I explore to what extent international borrowing can overcome resource scarcity in a small open economy, in order to have sustainable growth. First, a benchmark model with a constant interest rate and technical progress is set up to see if the economy's growth can be sustainable in the long run. Secondly, the case of a debt elastic interest rate is analysed. The main finding of this paper is that borrowing on international capital markets does not permit sustainable growth for a country with exhaustible natural resources, when the interest rate is constant. Nevertheless, when the interest rate is endogenized, the consumption growth rate can be positive before declining.

Suggested Citation

  • Hooper, Emma, 2019. "Sustainable growth and financial markets in a natural resource-rich country," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 341-348.
    • Handle: RePEc:eee:streco:v:51:y:2019:i:c:p:341-348
    DOI: 10.1016/j.strueco.2018.11.007
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    References listed on IDEAS

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    Cited by:

    1. Margarita Ignatyeva & Vera Yurak & Oksana Logvinenko, 2020. "A New Look at the Natural Capital Concept: Approaches, Structure, and Evaluation Procedure," Sustainability, MDPI, vol. 12(21), pages 1-21, November.

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    More about this item

    Keywords

    E20; O40; Q32; E44; Exhaustible natural resources; Exogenous growth; Financial markets;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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