Structural Differences and Macroeconomic Adjustment to Oil Price Increases in a Three-Country Model

49 Pages Posted: 13 Nov 2007

See all articles by Nancy Peregrim Marion

Nancy Peregrim Marion

Dartmouth College - Department of Economics

Lars E. O. Svensson

Stockholm School of Economics; Stockholm University - Institute for International Economic Studies (IIES); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: 1982

Abstract

In this paper a three-country model based on intertemporal maximizing behavior is constructed in order to analyze the effects of oil price increases on welfare levels and trade balance positions. The model can also be used to assess the effects of oil price increases on the world interest rate, on the final goods terms of trade between oil importers (what is sometimes called the real exchange rate), and on output, investment and savings levels, oil imports, wages, and consumption at each date. The analysis highlights the role of structural asymmetries between oil importers in accounting for differences in trade balance responses. A number of structural differences are isolated in turn in order to determine their influence on the final goods terms of trade, which is the key factor in affecting relative trade balance positions.

Suggested Citation

Marion, Nancy P. and Svensson, Lars E.O., Structural Differences and Macroeconomic Adjustment to Oil Price Increases in a Three-Country Model (1982). NBER Working Paper No. w0839, Available at SSRN: https://ssrn.com/abstract=351377

Nancy P. Marion (Contact Author)

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
(603) 646-2511 (Phone)

Lars E.O. Svensson

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

HOME PAGE: http://larseosvensson.se

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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