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Policy Challenge of Resource-Rich Developing Countries: Case of Mongolia

Author

Listed:
  • Byambasuren, Tsenguunjav
  • Erdenebold, Uranzaya
  • Otgonbayar, Baasansuren

Abstract

This paper evaluates whether natural resource exports revenue of Mongolia reduces the interest rate spread using single-sector model and studies the cases that decreased their interest rate spread successfully. The results suggest that the difference in quality of natural resource’s expenditure is the key factor of developing stable economy. As witnessed by the examples of Botswana and Sierra Leone, natural wealth can become both of a blessing or a curse depending on the effectiveness of economic and political policies. In other words, if Mongolia spend its resource revenue ineffectively, we will lose our fame in the international market and it leads us to be pegged with high interest rate. Finally, we suggest some policy recommendations for optimal spending of the windfall revenue based on our result.

Suggested Citation

  • Byambasuren, Tsenguunjav & Erdenebold, Uranzaya & Otgonbayar, Baasansuren, 2013. "Policy Challenge of Resource-Rich Developing Countries: Case of Mongolia," MPRA Paper 61559, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:61559
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    References listed on IDEAS

    as
    1. Daniel Lederman & William F. Maloney, 2007. "Natural Resources : Neither Curse nor Destiny," World Bank Publications - Books, The World Bank Group, number 7183, December.
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    4. Frederick van der Ploeg & Anthony J. Venables, 2011. "Harnessing Windfall Revenues: Optimal Policies for Resource‐Rich Developing Economies," Economic Journal, Royal Economic Society, vol. 121(551), pages 1-30, March.
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    6. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39, pages 137-137.
    7. Frankel, Jeffrey A., 2010. "The Natural Resource Curse: A Survey," Scholarly Articles 4454156, Harvard Kennedy School of Government.
    8. Jeffrey Frankel, 2003. "A Proposed Monetary Regime for Small Commodity Exporters: Peg the Export Price (‘PEP’)," International Finance, Wiley Blackwell, vol. 6(1), pages 61-88, March.
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    More about this item

    Keywords

    Interest rate spread; Single-sector model; Macro prudent policy of resource-rich country;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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