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Resource Discoveries and 'Excessive' External Borrowing

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  • Mansoorian, Arman

Abstract

This paper incorporates a three-sector Dutch disease model into the overlapping generations framework of O. Blanchard (1985). It is shown that, if the extraction of natural resources is capital intensive, then a resource discovery may shift income away from labor. If this happens, then the asset holders at the time of the discovery will incur such a large debt that, in order to pay the interest on the debt, aggregate expenditure in the new steady state would have to be smaller than it was before the resource discovery. The country may then experience both real depreciation and proindustrialization. Copyright 1991 by Royal Economic Society.

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  • Mansoorian, Arman, 1991. "Resource Discoveries and 'Excessive' External Borrowing," Economic Journal, Royal Economic Society, vol. 101(409), pages 1497-1509, November.
  • Handle: RePEc:ecj:econjl:v:101:y:1991:i:409:p:1497-509
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    Cited by:

    1. Frederick van der Ploeg & Steven Poelhekke, 2009. "The Volatility Curse: Revisiting the Paradox of Plenty," DNB Working Papers 206, Netherlands Central Bank, Research Department.
    2. Allegret, Jean-Pierre & Couharde, Cécile & Coulibaly, Dramane & Mignon, Valérie, 2014. "Current accounts and oil price fluctuations in oil-exporting countries: The role of financial development," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 185-201.
    3. Alberto Botta, 2014. "The Macroeconomics of a Financial Dutch Disease," DEM Working Papers Series 089, University of Pavia, Department of Economics and Management.
    4. van der Ploeg, Frederick & Venables, Anthony J., 2013. "Absorbing a windfall of foreign exchange: Dutch disease dynamics," Journal of Development Economics, Elsevier, vol. 103(C), pages 229-243.
    5. Alberto Botta & Antoine Godin & Marco Missaglia, 2016. "Finance, foreign (direct) investment and dutch disease: the case of Colombia," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 265-289, August.
    6. Rabah Arezki & Frederik van der Ploeg, 2007. "Can the Natural Resource Curse Be Turned Into a Blessing? The Role of Trade Policies and Institutions," IMF Working Papers 07/55, International Monetary Fund.
    7. Gvozdeva, Margarita & Kazakova, M.V. & Kiblitskaya, T.R. & Lyubimov, I.L. & Nesterova, K.V., 2016. "Various Aspects of Natural Resource Wealth Effect on Economic Growth," Working Papers 2045, Russian Presidential Academy of National Economy and Public Administration.
    8. Serino, L.A., 2008. "An investigation of the competitiveness hypothesis of the resource curse," ISS Working Papers - General Series 455, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    9. O Okiti, 2003. "A Dynamic General Equilibrium Model with Terms of Trade Shocks: A Small Open Economy Case," The School of Economics Discussion Paper Series 0333, Economics, The University of Manchester.
    10. Araujo, Juliana D. & Li, Bin Grace & Poplawski-Ribeiro, Marcos & Zanna, Luis-Felipe, 2016. "Current account norms in natural resource rich and capital scarce economies," Journal of Development Economics, Elsevier, vol. 120(C), pages 144-156.
    11. van der Ploeg, Frederick & Venables, Anthony J, 2008. "Harnessing Windfall Revenues in Developing Economies: Sovereign Wealth Funds and Optimal Tradeoffs Between Citizen Dividends, Public Infrastructure and Debt Reduction," CEPR Discussion Papers 6954, C.E.P.R. Discussion Papers.
    12. Everhart, Stephen & Duval-Hernandez, Robert, 2001. "Management of oil windfalls in Mexico : historical experience and policy options for the future," Policy Research Working Paper Series 2592, The World Bank.
    13. van der Ploeg, Frederick, 2006. "Challenges and Opportunities for Resource Rich Economies," CEPR Discussion Papers 5688, C.E.P.R. Discussion Papers.
    14. Mideksa, Torben K., 2013. "The economic impact of natural resources," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 277-289.
    15. Kuralbayeva, Karlygash & Vines, David, 2006. "Terms of Trade Shocks in an Intertemporal Model: Should We Worry about the Dutch Disease or Excessive Borrowing?," CEPR Discussion Papers 5857, C.E.P.R. Discussion Papers.
    16. Collier, Paul & Goderis, Benedikt, 2012. "Commodity prices and growth: An empirical investigation," European Economic Review, Elsevier, vol. 56(6), pages 1241-1260.
    17. Cust,James Frederick & Mihalyi,David, 2017. "Evidence for a presource curse ? oil discoveries, elevated expectations, and growth disappointments," Policy Research Working Paper Series 8140, The World Bank.
    18. Francisco Alcalá & Diego Peñarrubia, 2000. "Economic booms, trade deficits and economic policy," Economics Working Papers 397, Department of Economics and Business, Universitat Pompeu Fabra.
    19. Casper Ewijk, 1994. "Growth promoting policies, distribution, and the balance of payments," Journal of Economics, Springer, vol. 60(1), pages 55-80, February.

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