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Efficient consumption of revenues from natural resources – An application to Norwegian petroleum revenues

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  • Q. Farooq Akram

    (Norges Bank)

Abstract

This paper addresses the so-called natural resource curse by devising a rule that can reduce macroeconomic costs associated with the consumption of revenues from natural resources. It assumes that such macroeconomic costs are mainly brought about by changes in the real exchange rate, which adjusts in order to maintain external balance. Thus it derives a consumption rule, denoted as the efficient consumption rate, that would make the behaviour of the real exchange rate mimic that of the real exchange rate in the absence of natural resources. Accordingly, growth of exports and imports of traditional goods and services, and implicitly the sectoral composition of the economy, become largely immune to the consumption of natural resources. The theoretical framework is applied to estimate and evaluate an efficient consumption rate for Norway’s sizeable petroleum revenues.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2005/1.

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Length: 30 pages
Date of creation: 01 Mar 2005
Date of revision:
Handle: RePEc:bno:worpap:2005_01

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Related research

Keywords: Natural resources; Dutch disease; real exchange rate.;

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References

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  1. Paul Krugman, 1988. "Differences In Income Elasticities and Trends in Real Exchange Rates," NBER Working Papers 2761, National Bureau of Economic Research, Inc.
  2. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1997. "A Mixed Blessing: Natural Resources and Economic Growth," CEPR Discussion Papers 1668, C.E.P.R. Discussion Papers.
  3. Matsen, Egil & Torvik, Ragnar, 2005. "Optimal Dutch disease," Journal of Development Economics, Elsevier, vol. 78(2), pages 494-515, December.
  4. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1999. "A Mixed Blessing," Macroeconomic Dynamics, Cambridge University Press, vol. 3(02), pages 204-225, June.
  5. Xavier Sala-i-Martin & Arvind Subramanian, 2003. "Addressing the natural resource curse: An illustration from Nigeria," Discussion Papers 0203-15, Columbia University, Department of Economics.
  6. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-80, November.
  7. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse," IMF Working Papers 03/139, International Monetary Fund.
  8. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
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Cited by:
  1. Ragna Alstadheim, 2005. "Is the price level in Norway determined by fiscal policy?," Working Paper 2005/5, Norges Bank.
  2. Jair N. Ojeda & Julián A. Parra-Polanía & Carmiña O. Vargas, 2014. "Natural-Resource Booms, Fiscal Rules and Welfare in a Small Open Economy," BORRADORES DE ECONOMIA 011132, BANCO DE LA REPÚBLICA.

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