Working Paper: CEPR ID: DP9318
Authors: Torfinn Harding; Anthony J. Venables
Abstract: Foreign exchange windfalls such as those from natural resource revenues change non-resource exports, imports, and the capital account. We study the balance between these responses and, using data on 41 resource exporters for 1970-2006, show that the response to a dollar of resource revenue is, approximately, to decrease non-resource exports by 75 cents and increase imports by 25 cents, implying a negligible effect on foreign saving. The negative per dollar impact on exports is larger for countries which have good institutions and higher income levels. These countries have a higher share of manufacturing in their non-resource exports, and we show that manufactures are more susceptible than other products to being crowded out by resource exports.
Keywords: Dutch disease; exports; imports; natural resources; resource curse; trade
JEL Codes: E21; E62; F43; H63; O11; Q33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Natural resource exports (Q37) | Nonresource exports (Q37) |
| Natural resource exports (Q37) | Nonresource imports (Q37) |
| Natural resource exports (Q37) | Manufacturing exports (L60) |
| Natural resource exports (Q37) | Foreign savings (F32) |
| Higher income and better governance (H19) | Negative impact on nonresource exports (F69) |