Shocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party.
In this paper, we analyze the impact of terms of trade and risk-premium shocks on a small open economy in an intertemporal Dutch disease model, with international capital mobility. Given that an improvement in the terms of trade is associated with a decrease in the risk-premium on lending to this ec...
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| Format: | Journal article |
| Language: | English |
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2008
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| _version_ | 1826261672639070208 |
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| author | Kuralbayeva, K Vines, D |
| author_facet | Kuralbayeva, K Vines, D |
| author_sort | Kuralbayeva, K |
| collection | OXFORD |
| description | In this paper, we analyze the impact of terms of trade and risk-premium shocks on a small open economy in an intertemporal Dutch disease model, with international capital mobility. Given that an improvement in the terms of trade is associated with a decrease in the risk-premium on lending to this economy, we find that this can lead to a Dutch party (rather than Dutch disease) in which real exchange rate appreciation is associated with an expansion of the capital-intensive traded sector, hence, pro-industrialization. The economy also accumulates more debt in the long-run in response to the lower borrowing costs. |
| first_indexed | 2024-03-06T19:25:02Z |
| format | Journal article |
| id | oxford-uuid:1b695e97-6ccc-4da2-bade-ecf06cacea4e |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T19:25:02Z |
| publishDate | 2008 |
| record_format | dspace |
| spelling | oxford-uuid:1b695e97-6ccc-4da2-bade-ecf06cacea4e2022-03-26T11:00:12ZShocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:1b695e97-6ccc-4da2-bade-ecf06cacea4eEnglishDepartment of Economics - ePrints2008Kuralbayeva, KVines, DIn this paper, we analyze the impact of terms of trade and risk-premium shocks on a small open economy in an intertemporal Dutch disease model, with international capital mobility. Given that an improvement in the terms of trade is associated with a decrease in the risk-premium on lending to this economy, we find that this can lead to a Dutch party (rather than Dutch disease) in which real exchange rate appreciation is associated with an expansion of the capital-intensive traded sector, hence, pro-industrialization. The economy also accumulates more debt in the long-run in response to the lower borrowing costs. |
| spellingShingle | Kuralbayeva, K Vines, D Shocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party. |
| title | Shocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party. |
| title_full | Shocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party. |
| title_fullStr | Shocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party. |
| title_full_unstemmed | Shocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party. |
| title_short | Shocks to Terms of Trade and Risk-Premium in an Intertemporal Model: The Dutch Disease and a Dutch Party. |
| title_sort | shocks to terms of trade and risk premium in an intertemporal model the dutch disease and a dutch party |
| work_keys_str_mv | AT kuralbayevak shockstotermsoftradeandriskpremiuminanintertemporalmodelthedutchdiseaseandadutchparty AT vinesd shockstotermsoftradeandriskpremiuminanintertemporalmodelthedutchdiseaseandadutchparty |