In principle, a country can not endure negative genuine savings for long
periods of time without experiencing declining consumption. Nevertheless,
theoreticians envisage two alternatives to explain how an exporter of
non-renewable natural resources could experience permanent negative
genuine savings and still ensure sustainability. The first one alleges
that the capital gains arising from the expected improvement in the
terms of trade would suffice to compensate for the negative savings of
the resource ...
In principle, a country can not endure negative genuine savings for long
periods of time without experiencing declining consumption. Nevertheless,
theoreticians envisage two alternatives to explain how an exporter of
non-renewable natural resources could experience permanent negative
genuine savings and still ensure sustainability. The first one alleges
that the capital gains arising from the expected improvement in the
terms of trade would suffice to compensate for the negative savings of
the resource exporter. The second alternative points at technological
change as a way to avoid economic collapse. This paper uses the data
of Venezuela and Mexico to empirically test the first of these two
hypotheses. The results presented here prove that the terms of
trade do not suffice to compensate the depletion of oil reserves
in these two open economies.
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