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

Emma Hooper

Structural Change and Economic Dynamics, 2019, vol. 51, issue C, 341-348

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.

Keywords: E20; O40; Q32; E44; Exhaustible natural resources; Exogenous growth; Financial markets (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:51:y:2019:i:c:p:341-348

DOI: 10.1016/j.strueco.2018.11.007

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