World Equilibrium with Oil Price Increases: An Intertemporal Analysis / Nancy Peregrim Marion, Lars E.O. Svensson.

Format:

Book

Author/Creator:

Marion, Nancy Peregrim.

Contributor:

National Bureau of Economic Research.

Svensson, Lars E.O.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1074.

NBER working paper series no. w1074

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

World Equilibrium with Oil Price Increases

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1983.

Summary:

This paper examines the effect of OPEC price increases on the welfare of a group of oil-importing industrial countries. It also studies how taxes or subsidies on oil imports or capital flows could alter the group's welfare. The analysis is conducted using a general-equilibrium model that describes the behavior of two actors, OPEC and the oil-importing bloc called Industria. The analysis is explicitly intertemporal and takes into account endogenous changes in saving, investment and employment.We show that Industria's welfare is affected not only by direct oil terms of trade effect, but also by changes in the world rate of interest(intertemporal terms of trade effects) and, for rigid wages, changes in employment. Thus Industria gains from the intertemporal terms of trade effect if it is a net borrower and the world rate of interest falls. Precise conditions for whether the world rate of interest falls or rises are given.We also show that Industria may gain from subsidizing oil imports rather than taxing them, in particular if wages are rigid, and that it may gain from restricting international capital mobility.

Notes:

Print version record

February 1983.