Sustainable Growth and Financial Markets in a Natural Resource Rich Country

Emma Hooper (1)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille

We study the optimal growth path of a natural resource rich country, which can borrow from international financial markets. More precisely, we explore to what extent international borrowing can overcome resource scarcity in a small open economy, in order to have sustainable growth. First, this paper presents a benchmark model with a constant interest rate. We then introduce techni-cal progress to see if the economy's growth can be sustainable in the long-run. Secondly, we analyse the case of a debt elastic interest rate, with a constant price of natural resources and then with increasing prices. 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 we endogenize the interest rate the consumption growth rate can be positive before declining.

Mots clés: financial markets; exhaustible natural resources; exogenous growth

Domaines: Economies et finances

Emma Hooper. Sustainable Growth and Financial Markets in a Natural Resource Rich Country. 2015. ⟨halshs-01119420⟩