Export diversification and resource-based industrialization: the case of natural gas
For resource-rich economies, primary commodity specialization has often been considered to be detrimental to growth. Accordingly, export diversification policies centered on resource-based industries have long been advocated as effective ways to moderate the large variability of export revenues. This paper discusses the applicability of a mean-variance portfolio approach to design these strategies and proposes some modifications aimed at capturing the key features of resource processing industries (presence of scale economies and investment lumpiness). These modifications help make the approach more plausible for use in resource-rich countries. An application to the case of natural gas is then discussed using data obtained from Monte Carlo simulations of a calibrated empirical model. Lastly, the proposed framework is put to work to evaluate the performances of the diversification strategies implemented in a set of nine gas-rich economies. These results are then used to formulate some policy recommendations.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Social Sciences Building, City University London, Whiskin Street, London, EC1R 0JD, United Kingdom,|
Phone: +44 (0)20 7040 8500
Web page: http://www.city.ac.uk
More information through EDIRC
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.:
- Roques, Fabien A. & Newbery, David M. & Nuttall, William J., 2008. "Fuel mix diversification incentives in liberalized electricity markets: A Mean-Variance Portfolio theory approach," Energy Economics, Elsevier, vol. 30(4), pages 1831-1849, July.
- Andre F. Perold, 1984. "Large-Scale Portfolio Optimization," Management Science, INFORMS, vol. 30(10), pages 1143-1160, October.
- Robert F. Engle & Kevin Sheppard, 2001.
"Theoretical and Empirical properties of Dynamic Conditional Correlation Multivariate GARCH,"
NBER Working Papers
8554, National Bureau of Economic Research, Inc.
- Engle, Robert F & Sheppard, Kevin K, 2001. "Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH," University of California at San Diego, Economics Working Paper Series qt5s2218dp, Department of Economics, UC San Diego.
- Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-50, July.
- Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, vol. 19(2), pages 141-174.
- Joshua Aizenman & Nancy Marion, 1991.
"Policy Uncertainty, Persistence and Growth,"
NBER Working Papers
3848, National Bureau of Economic Research, Inc.
- repec:bbe:wpaper:200203 is not listed on IDEAS
- Owens, Trudy & Wood, Adrian, 1997. "Export-oriented industrialization through primary processing?," World Development, Elsevier, vol. 25(9), pages 1453-1470, September.
- Auty, Richard M., 1988. "State enterprise and resource based industry in oil exporting countries," Resources Policy, Elsevier, vol. 14(4), pages 275-287, December.
- MacKinnon, James G, 1996.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
- James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
- Auty, R. M., 1988. "Oil-exporters' disappointing diversification into resource-based industry : The external causes," Energy Policy, Elsevier, vol. 16(3), pages 230-242, June.
- Leybourne, S. Y. & Lloyd, T. A. & Reed, G. V., 1994. "The excess comovement of commodity prices revisited," World Development, Elsevier, vol. 22(11), pages 1747-1758, November.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Chunrong Ai & Arjun Chatrath & Frank Song, 2006. "On the Comovement of Commodity Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 574-588.
- Jeffrey A. Frankel, 2010.
"The Natural Resource Curse: A Survey,"
NBER Working Papers
15836, National Bureau of Economic Research, Inc.
- Walter Briec & Kristiaan Kerstens & Jean Baptiste Lesourd, 2001. "Single Period Markowitz Portfolio Selection, Performance Gading and Duality: A Variation on Luenberger'a Shortage Function," Working Papers 0203, Departament Empresa, Universitat Autònoma de Barcelona, revised Apr 2002.
- Asche, Frank & Osmundsen, Petter & Tveteras, Ragnar, 2002.
"European market integration for gas? Volume flexibility and political risk,"
Elsevier, vol. 24(3), pages 249-265, May.
- Frank Asche & Petter Osmundsen & Ragnar Tveterås, 2000. "European Market Integration for Gas? Volume Flexibility and Political Risk," CESifo Working Paper Series 358, CESifo Group Munich.
- Love, James, 1986. "Commodity concentration and export earnings instability : A shift from cross-section to time series analysis," Journal of Development Economics, Elsevier, vol. 24(2), pages 239-248, December.
- Roemer, Michael, 1979. "Resource-based industrialization in the developing countries : A survey," Journal of Development Economics, Elsevier, vol. 6(2), pages 163-202, April.
- Mendoza, Enrique G., 1997. "Terms-of-trade uncertainty and economic growth," Journal of Development Economics, Elsevier, vol. 54(2), pages 323-356, December.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
- Hsieh, David A, 1991. " Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-77, December.
- Brainard, William C. & Cooper, Richard N., 1968. "Uncertainty and Diversification in International Trade," Food Research Institute Studies, Stanford University, Food Research Institute, issue 03.
- Deb, Partha & Trivedi, Pravin K & Varangis, Panayotis, 1996. "The Excess Co-movement of Commodity Prices Reconsidered," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(3), pages 275-91, May-June.
- Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
- Morey, Matthew R. & Morey, Richard C., 1999. "Mutual fund performance appraisals: a multi-horizon perspective with endogenous benchmarking," Omega, Elsevier, vol. 27(2), pages 241-258, April.
- Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
- Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
- Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 98(1), pages 85-106.
- Michael Alexeev & Robert Conrad, 2009. "The Elusive Curse of Oil," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 586-598, August.
- Auty, Richard & Gelb, Alan, 1986. "Oil windfalls in a small parliamentary democracy: Their impact on Trinidad and Tobago," World Development, Elsevier, vol. 14(9), pages 1161-1175, September.
When requesting a correction, please mention this item's handle: RePEc:cty:dpaper:12/01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Research Publications Librarian)
If references are entirely missing, you can add them using this form.