Energy Price Shocks and External Balances

• Main Author: HUYNH, Bao Tan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: energy; energy price shock; trade; DSGE model; external balances; International Economics; Macroeconomics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1897; https://ink.library.smu.edu.sg/context/soe_research/article/2857/viewcontent/JMP___Energy_Price_Shocks_and_External_Balances.pdf
• Institution: Singapore Management University

This paper studies the impact of a wide set of energy price shocks on exter- nal balances using a two-country framework comprising multiple sectors and en- dogenous 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.