The global resource market and volatility

New working paper: In this paper, we focus on the role of the global resource market in a dynamic model that incorporates a renewable resource sector. In particular, we show that resource-abundant countries become more volatile when the resource sector has access to the global market. By contrast, if the resource sector does not have access to its market, volatility is greatly reduced. To confirm that our main finding is robust, we incorporate into our basic framework endogenous labor-leisure choice and investment in the natural resource.