Boom goes the price : giant resource discoveries and real exchange rate appreciation
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We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. A giant discovery with the value of 10% of a country's GDP appreciates the real exchange rate by 1.5% within 10 years following the discovery. The appreciation starts before production starts and the non-traded component of the real exchange rate drives the appreciation. Labor reallocates from the traded goods sector to the non-traded goods sector, leading to changes in labor productivity. These findings provide direct evidence on the channels central to the theories of the Dutch disease and the Balassa-Samuelson effect.
Harding , T , Stefanski , R & Toews , G 2020 , ' Boom goes the price : giant resource discoveries and real exchange rate appreciation ' , The Economic Journal , vol. 130 , no. 630 , pp. 1715-1728 . https://doi.org/10.1093/ej/ueaa016
The Economic Journal
Copyright © The Author 2020. Published by Oxford University Press on behalf of Royal Economic Society. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.
DescriptionFunding: BP funded Oxford Centre for the Analysis of Resource Rich Economies (Oxcarre) and the Equinor chair in Economics at NHH is gratefully acknowledged.
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