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Australia Mining Boom and Dutch Disease: Analysis Using VAR Method

Author

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  • Kegomoditswe Koitsiwe

    (Akita University)

Abstract

Australia has experienced several episodes of mining boom in its economy. Studies on the impact of mining booms on the economic growth and development indicates that, mining boom either through rise in commodity prices or mining investment tend to result in appreciation of currency thus harming the manufacturing and other sectors in the economy, while the overall gross domestic product increases and this is termed-Dutch Disease. The aim of this work is to investigate the dynamic relationship between mining GDP, manufacturing GDP, service GDP and exchange-rate using vector autoregressive (VAR) approach consisting of Impulse Response Functions (IRFs) and Variance Decomposition (VDCs). Using annual data for the sample period 1975-2013 sourced from Australian Bureau of Statistics, we find mixed evidence presented by the IRFs, while the VDCs reveal that mining sector have impact on the exchange rate hence manufacturing sector. Additionally mining GDP contribute to the variation in the service sector. The study concludes by suggesting promotion of international competitiveness in other sectors such as manufacturing and tourism, to also promote innovation and technical know-how to help combat Dutch Disease effects that can turn mining boom into a resource curse.

Suggested Citation

  • Kegomoditswe Koitsiwe, 2015. "Australia Mining Boom and Dutch Disease: Analysis Using VAR Method," Proceedings of Economics and Finance Conferences 2204027, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:2204027
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    File URL: https://iises.net/proceedings/4th-economics-finance-conference-london/table-of-content/detail?cid=22&iid=029&rid=4027
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    Citations

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    Cited by:

    1. Barczikay, Tamás & Biedermann, Zsuzsánna & Szalai, László, 2020. "An investigation of a partial Dutch disease in Botswana," Resources Policy, Elsevier, vol. 67(C).
    2. Honorata Nyga-Łukaszewska & Tomasz M. Napiórkowski, 2022. "Does Energy Demand Security Affect International Competitiveness? Case of Selected Energy-Exporting OECD Countries," Energies, MDPI, vol. 15(6), pages 1-19, March.
    3. Niftiyev, Ibrahim, 2022. "The Dutch Disease Syndrome Side Effects in Manufacturing Employment: A VAR Analysis of the Azerbaijan Economy," EconStor Conference Papers 266654, ZBW - Leibniz Information Centre for Economics.
    4. Murhula K., Pacifique & Achiza N., Alain, 2021. "Mining Boom, Economic Growth and Sustainable Development in Democratic Republic of the Congo," MPRA Paper 113330, University Library of Munich, Germany, revised 11 Jun 2022.
    5. Cheuathonghua, Massaporn & de Boyrie, Maria E. & Pavlova, Ivelina & Wongkantarakorn, Jutamas, 2022. "Extreme risk spillovers from commodity indexes to sovereign CDS spreads of commodity dependent countries: A VAR quantile analysis," International Review of Financial Analysis, Elsevier, vol. 80(C).

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