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Energy price shocks and external balances

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  • Bao Tan Huynh

Abstract

This paper studies the impact of a wide set of energy price shocks on external balances using a two‐country framework comprising multiple sectors and endogenous energy production with convex costs. The paper disentangles different demand and supply shocks in the energy market through their distinct impact on external balances. It provides a theoretical confirmation of Kilian et al. (2009) and a theoretical foundation to the determining role of the non‐energy trade balance in the transmission of energy price shocks. The presence of durables also highlights the immediate channel through which energy prices impact the non‐energy trade balance. Chocs dans les prix de l’énergie et balances extérieures. Ce texte étudie l’impact d’un large éventail de chocs dans les prix de l’énergie sur les balances extérieures à l’aide d’un cadre d’analyse à deux pays comprenant plusieurs secteurs et une production endogène d’énergie avec convexité des coûts. Le texte départage les chocs différents du côté de l’offre et de la demande dans le secteur énergétique par leurs impacts distincts sur les balances extérieures. On fournit une confirmation théorique des travaux de Kilian et al. (2009) et un fondement théorique pour la détermination du rôle de la balance commerciale dans le secteur non‐énergétique sur la transmission des chocs dans le prix de l’énergie. La présence de biens durables souligne le canal immédiat à travers lequel les prix de l’énergie impactent la balance commerciale dans les secteurs non‐énergétiques.

Suggested Citation

  • Bao Tan Huynh, 2016. "Energy price shocks and external balances," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(2), pages 789-814, May.
  • Handle: RePEc:wly:canjec:v:49:y:2016:i:2:p:789-814
    DOI: 10.1111/caje.12214
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    References listed on IDEAS

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    1. Backus, David K. & Crucini, Mario J., 2000. "Oil prices and the terms of trade," Journal of International Economics, Elsevier, vol. 50(1), pages 185-213, February.
    2. Kilian, Lutz & Rebucci, Alessandro & Spatafora, Nikola, 2009. "Oil shocks and external balances," Journal of International Economics, Elsevier, vol. 77(2), pages 181-194, April.
    3. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October.
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    11. Lutz Kilian & Daniel P. Murphy, 2012. "Why Agnostic Sign Restrictions Are Not Enough: Understanding The Dynamics Of Oil Market Var Models," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1166-1188, October.
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    Cited by:

    1. Tumala, Mohammed M. & Salisu, Afees A. & Gambo, Ali I., 2023. "Disentangled oil shocks and stock market volatility in Nigeria and South Africa: A GARCH-MIDAS approach," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 707-717.

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