The paper examines welfare effects and the trade balance response to changes in the world oil prices and interest rates for a small oil-importing economy. The trade balance is mainly seen as the difference between saving and investment, and these are derived from intertemporal optimization. It is shown that the welfare effects consist of static terms of trade effects, intertemporal terms of trade effects, and employment effects. The trade balance deteriorates for temporary oil price increases, whereas its response is ambiguous for permanent oil price increases. For a fall in the world interest rate, the trade balance deteriorates, if the economy is a net borrower.

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.

This report analyzes the relationship between the dollar and the price of oil and how the two might interact. This report provides an assessment of the impact a range of prices of imported oil could have on the U.S. trade deficit.

The sharp drop in oil prices is one of the most important global economic developments over the past year. The SDN finds that (i) supply factors have played a somewhat larger role than demand factors in driving the oil price drop, (ii) a substantial part of the price decline is expected to persist into the medium term, although there is large uncertainty, (iii) lower oil prices will support global growth, (iv) the sharp oil price drop could still trigger financial strains, and (v) policy responses should depend on the terms-of-trade impact, fiscal and external vulnerabilities, and domestic cyclical position.

In this paper a three-country model based on intertemporal maximizing behavior is constructed in order to analyze the effects of oil price increases on welfare levels and trade balance positions. The model can also be used to assess the effects of oil price increases on the world interest rate, on the final goods terms of trade between oil importers (what is sometimes called the real exchange rate), and on output, investment and savings levels, oil imports, wages, and consumption at each date. The analysis highlights the role of structural asymmetries between oil importers in accounting for differences in trade balance responses. A number of structural differences are isolated in turn in order to determine their influence on the final goods terms of trade, which is the key factor in affecting relative trade balance positions

This book, originally published in 1981, discusses the various welfare effects – including ai, debt, trade and labour flows - of the rise in oil prices and revenues which took place in the 1970s. These complex effects and the negotiating stances of the developing countries are all examined an dinvestigated, drawing upon a wide range of sources and material for the more quantitative parts. Throughout, however, the treatment is non-mathematical and is written in clear English accessible not only to bankers and polititians, but also students of economics, international relationjs and area studies.