Sustainable growth, exhaustible resources, and the environment in an open economy

This dissertation analyzes how economic growth processes can restrict future generations due to limited resources, environmental effects, and debt accumulation; I raise questions relating to sustainable consumption and welfare, both present and future. Essay 1, entitled An Extraction Model of Non-renewable Resources, considers a strategy for the extraction and exploitation of such resources. An intertemporal model of a short decision-time horizon with a monopolistic resource producer is presented. Recent developments have shown that non-renewable resources fluctuate greatly in price and there also seems to be an upward price trend. Consistent with recent empirical studies, my numerical analysis shows a U-shaped path for the price and an inverted U-shaped path for the extraction rate. Essay 2, entitled The Modeling of Sustainable Growth, introduces an intertemporal growth model with non-renewable resources and a household welfare function. A closed economy growth model is extended to an open economy. Further, a distinction between resource-rich and resource-poor countries is made. Numerical analysis confirms the empirically observed patterns of an inverted U-shape for the capital stock when the non-renewable resource declines monotonically and depletes. All of the models I present are solved using a finite horizon solution methodology known as Nonlinear Model Predictive Control (NMPC). Essay 3, entitled Macroeconomic Instability: External Debt, addresses external sources of financing development. Using a stochastic growth model in an open economy, I discuss major external disturbances for sustained resource-driven development that can make a country more vulnerable to economic shocks. Excessive external debt problems are examined for both resource-poor and resource-rich countries. The optimal debt ratios are explained by Tobin's mean variance (TMV).