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We examine the effects of endogenously determined oil price fluctuations in a two-country DSGE model. Under incomplete financial markets, an oil market-specific shock that boosts the oil price results in a wealth transfer toward oil exporters, depresses the oil importer's consumption, and causes the oil importer's real exchange rate to depreciate. Although the oil importer experiences a deterioration in the oil component of its trade balance, an improvement in the nonoil balance substantially dampens the effects on the overall trade balance.