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

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  • Emma Hooper

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, LABEX ReFi - Laboratory of Excellence for Financial Regulation - UP11 - Université Paris-Sud - Paris 11)

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.

Suggested Citation

  • Emma Hooper, 2019. "Sustainable growth and financial markets in a natural resource-rich country," Post-Print hal-02428952, HAL.
    • Handle: RePEc:hal:journl:hal-02428952
    DOI: 10.1016/j.strueco.2018.11.007
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02428952v1
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    References listed on IDEAS

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    Cited by:

    1. Margarita Ignatyeva & Vera Yurak & Oksana Logvinenko, 2020. "A New Look at the Natural Capital Concept: Approaches, Structure, and Evaluation Procedure," Sustainability, MDPI, vol. 12(21), pages 1-21, November.

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