Economic Crisis and Challenge to Sustainable Development Goals: The Case of a Small Open Economy

Abstract

In this chapter, the author considers a three-sector general equilibrium model in the context of a developing nation to find out the impact of an increase in foreign capital inflow on the welfare level of the nation. Comparative static analysis reveals that an increase in the inflow of foreign capital causes redistribution across the factors of production and a reallocation of resources, reflected through the change in output. Moreover, the author considers the case of technology transfer and proves that an increase in foreign capital inflow makes the country better off in terms of social welfare even if the foreign capital is fully repatriated. Hence, this work shows that in the absence of any trade distortion, a partial investment liberalisation causes a welfare gain for a small open economy.

Citation

Mukherjee, R. (2024), "Economic Crisis and Challenge to Sustainable Development Goals: The Case of a Small Open Economy", Chatterjee, T. (Ed.) International Trade, Economic Crisis and the Sustainable Development Goals, Emerald Publishing Limited, Leeds, pp. 3-23. https://doi.org/10.1108/978-1-83753-586-620241001