Aguiar-Conraria and Wen (2008) argued that dependence on foreign oil raises the like-lihood of equilibrium indeterminacy (economic instability) for oil importing countries. We argue that this relation is more subtle. The endogenous choices of prices and quantities by a cartel of oil exporters,...

We show that dependence on foreign energy can increase economic instability by raising the likelihood of equilibrium indeterminacy, hence making fluctuations driven by self- fulfilling expectations easier to occur. This is demonstrated in a standard neoclassical growth model. Calibration...