Author:
Aguiar-Conraria Luís,Wen Yi
Abstract
We show that dependence on foreign energy can increase economic instability by raising the likelihood of equilibrium indeterminacy, hence making it easier for fluctuations driven by self-fulfilling expectations to occur. This is demonstrated in a standard neoclassical growth model. Calibration exercises, based on the estimated share of imported energy in production for several countries, show that the degree of reliance on foreign energy for many countries can easily make an otherwise determinate and stable economy indeterminate and unstable.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics
Cited by
10 articles.
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