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The Implications of Natural Resource Exports for Non-Resource Trade

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  • Anthony Venables
  • Torfinn Harding

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 show that the response to $1 of resource revenue is, for our preferred estimates, to decrease non-resource exports by 74 cents and increase imports by 23 cents, implying a negligible effect on foreign saving. The negative per $1 impact on exports is larger for manufactures than for other sectors, and particularly large for internationally mobile manufacturing sectors. While standard Dutch disease analysis points to contraction of the tradable sector as a whole, division into non-resource exports and imports is important if, as suggested by much development literature, a higher share of exports to GDP is associated with faster growth. The large negative impact of resources on these exports points to the difficulty resource rich economies face in diversifying their exports.

Suggested Citation

  • Anthony Venables & Torfinn Harding, 2013. "The Implications of Natural Resource Exports for Non-Resource Trade," OxCarre Working Papers 103, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:103
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    More about this item

    Keywords

    natural resources; Dutch disease; resource curse; trade; exports; imports;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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