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Mining booms and the exchange rate

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  • Freebairn, John

Abstract

The balance of payments identity linking the current account to net domestic investment and foreign capital inflows is used as a framework to assess the effects of a mining boom on the exchange rate. The exchange rate response is found to vary with whether the boom is generated by an increase in global demand or an increase in domestic supply, and the response varies over time as the boom moves through investment and production stages. Also, the exchange rate response depends on the mix of resident and nonresident investment funds, the share of the investment domestically sourced and the distribution of windfall income and its expenditure. A key result is the absence of a simple relationship between the terms of trade and the exchange rate.

Suggested Citation

  • Freebairn, John, 2015. "Mining booms and the exchange rate," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(4), October.
    • Handle: RePEc:ags:aareaj:283215
    DOI: 10.22004/ag.econ.283215
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    Cited by:

    1. Kym Anderson, 2019. "Australian Wine Industry Competitiveness: Why so Slow to Emerge?," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 12, pages 283-308, World Scientific Publishing Co. Pte. Ltd..
    2. Kym Anderson & Glyn Wittwer, 2019. "Asia’s Evolving Role in Global Wine Markets," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 14, pages 347-377, World Scientific Publishing Co. Pte. Ltd..
    3. Kym Anderson, 2020. "Trade Protectionism In Australia: Its Growth And Dismantling," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 1044-1067, December.
    4. Kym Anderson & Sundar Ponnusamy, 2019. "Structural Transformation to Manufacturing and Services: What Role for Trade?," Asian Development Review, MIT Press, vol. 36(2), pages 32-71, September.
    5. Kym Anderson, 2016. "Sectoral trends and shocks in Australia’s economic growth," Departmental Working Papers 2016-18, The Australian National University, Arndt-Corden Department of Economics.
    6. Kym Anderson, 2018. "Mining’s impact on the competitiveness of other sectors in a resource-rich economy: Australia since the 1840s," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 31(1), pages 141-151, May.
    7. Kym Anderson, 2022. "Structural transformation in growing open economies: Australia s experience," Departmental Working Papers 2022-13, The Australian National University, Arndt-Corden Department of Economics.
    8. Kym Anderson, 2017. "Sectoral Trends and Shocks in Australia's Economic Growth," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 57(1), pages 2-21, March.
    9. Kym Anderson, 2024. "Globalization and national commodity cycles: The case of wine in Australia," Departmental Working Papers 2024-10, The Australian National University, Arndt-Corden Department of Economics.

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