Oil shocks and external adjustment

Martin Bodenstein, Christopher Erceg and Luca Guerrieri

Journal of International Economics, 2011, vol. 83, issue 2, 168-184

Abstract: We examine the effects of endogenously determined oil price fluctuations in a two-country DSGE model. Under incomplete financial markets, an oil market-specific shock that boosts the oil price results in a wealth transfer toward oil exporters, depresses the oil importer's consumption, and causes the oil importer's real exchange rate to depreciate. Although the oil importer experiences a deterioration in the oil component of its trade balance, an improvement in the nonoil balance substantially dampens the effects on the overall trade balance.

Keywords: Oil; shocks; Trade; DSGE; models (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (235)

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Related works:
Working Paper: Oil Shocks and External Adjustment (2008)
Working Paper: Oil shocks and external adjustment (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:83:y:2011:i:2:p:168-184

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