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

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Author Info
Q. Farooq Akram (Norges Bank)

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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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File URL: http://www.norges-bank.no/upload/import/publikasjoner/arbeidsnotater/pdf/arb-2005-01.pdf
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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
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Handle: RePEc:bno:worpap:2005_01

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

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Find related papers by JEL classification:
Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Matsen, Egil & Torvik, Ragnar, 2005. "Optimal Dutch disease," Journal of Development Economics, Elsevier, vol. 78(2), pages 494-515, December. [Downloadable!] (restricted)
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  2. Paul Krugman, 1989. "Differences In Income Elasticities and Trends in Real Exchange Rates," NBER Working Papers 2761, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  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. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ragna Alstadheim, 2005. "Is the price level in Norway determined by fiscal policy?," Working Paper 2005/5, Norges Bank. [Downloadable!]
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