Aggregate Demand and Aggregate Supply Effects of a Resource Discovery in a Simple Macroeconomic Model

Phillip Lawler

The Manchester School of Economic & Social Studies, 1991, vol. 59, issue 3, 227-43

Abstract: This paper examines the macroeconomic impact of a resource discovery in a small open economy. Unlike previous models in which this issue has been explored that assume fixed natural levels of nonresource sector output and employment, the current framework allows the steady-state values of these variables to be determined endogenously. It is shown that a resource discovery, in inducing a real exchange rate appreciation, leads to a long-run expansion of the domestic nonresource sector. This result has significant implications for the transitional dynamics of nonresource output and employment that contrast sharply with those derived in previous work. Copyright 1991 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:59:y:1991:i:3:p:227-43

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