Macroeconomic Effects of Natural Resource Extraction: Applications to Papua New Guinea Suman S Basu

ISBN: 9781299678361

Published: June 13th 2014

ebook

38 pages


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Macroeconomic Effects of Natural Resource Extraction: Applications to Papua New Guinea  by  Suman S Basu

Macroeconomic Effects of Natural Resource Extraction: Applications to Papua New Guinea by Suman S Basu
June 13th 2014 | ebook | PDF, EPUB, FB2, DjVu, talking book, mp3, ZIP | 38 pages | ISBN: 9781299678361 | 5.55 Mb

To investigate the effects on Papua New Guineas economy of substantial liquified natural gas revenues arriving in 2015, we employ a model to examine the macroeconomic effects of a scalingup of natural resource windfall revenues and the implicationsMoreTo investigate the effects on Papua New Guineas economy of substantial liquified natural gas revenues arriving in 2015, we employ a model to examine the macroeconomic effects of a scalingup of natural resource windfall revenues and the implications for a variety of policy responses.

The model is a multi-sector dynamic stochastic general equilibrium (DSGE) model, and features components that allow for a detailed study of the effects of both fiscal and monetary policy in response to a positive shock to the mineral resource value of a country.

The model contains tradable, non-tradable, and mining sectors, as well as an independent central bank and fiscal authority. We calibrate the model to the current economy of Papua New Guinea and run a suite of policy simulations. We find that macroeconomic effects from a resource boom typically associated with Dutch Disease effects such as a real appreciation and a fall in tradable sector production stem largely from the non-tradable component of government spending. The central bank can offset the real appreciation, but not without crowding out the private sector.

A sovereign wealth fund (SWF), combined with a smooth capital spending path, entails the best means of dealing with macroeconomic volatility and maintaining a stable fiscal regime.



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