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From natural resource boom to sustainable economic growth: Lessons from Mongolia

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  • Li, Bin Grace
  • Gupta, Pranav
  • Yu, Jiangyan

Abstract

Many resource-rich developing countries are in the process of harnessing immense mining resources towards inclusive growth and prosperity. The often-large infrastructure gap in developing countries calls for public investment to unlock the long-term growth potential. This paper utilizes a structural model-based approach to analyze the macroeconomic impacts of different public investment strategies on key fiscal and growth variables. We apply the model to one of the resource-rich developing countries -- Mongolia. We find that, although scaling up public investment could provide a boost to growth, too rapid fiscal outlays will push the economy to its limit of absorptive capacity and increase macroeconomic vulnerabilities. Prudent fiscal policy, particularly moderating infrastructure investment and optimizing investment efficiency, is essential to maintain economic stability, as well as to boost the long-term sustainable growth for developing countries like Mongolia.

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  • Li, Bin Grace & Gupta, Pranav & Yu, Jiangyan, 2017. "From natural resource boom to sustainable economic growth: Lessons from Mongolia," International Economics, Elsevier, vol. 151(C), pages 7-25.
    • Handle: RePEc:eee:inteco:v:151:y:2017:i:c:p:7-25
    DOI: 10.1016/j.inteco.2017.03.001
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    Cited by:

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    2. Richard Pomfret, 2018. "Exploiting a natural resource in a poor country: The good, the bad and the ugly sides of the Kyrgyz Republic’s gold mine," Working Papers 372, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    3. Takuji Komatsuzaki, 2019. "Improving Public Infrastructure in the Philippines," Asian Development Review, MIT Press, vol. 36(2), pages 159-184, September.
    4. Huimin Jia & Yanqiu Wu, 2024. "RETRACTED ARTICLE: Sustainable energy utility investment role in energy transformation progress: case of Mongolia," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-16, April.
    5. Gunbileg Ganbayar, 2021. "Analysis of External Debt Sustainability in Mongolia: an Estimated DSGE Approach," Sustainability, MDPI, vol. 13(15), pages 1-17, July.
    6. Aqib Aslam & Samya Beidas-Strom & Mr. Rudolfs Bems & Oya Celasun & Zsoka Koczan, 2016. "Trading on Their Terms? Commodity Exporters in the Aftermath of the Commodity Boom," IMF Working Papers 2016/027, International Monetary Fund.
    7. Ye, Xiang & Rasoulinezhad, Ehsan, 2023. "Assessment of impacts of green bonds on renewable energy utilization efficiency," Renewable Energy, Elsevier, vol. 202(C), pages 626-633.
    8. Aleksandr Valerievich Makarov & Elena Vladislavovna Makarova & Aleksandr Borisovich Andreev, 2020. "Mongolia’s foreign economic relations at the current stage of development," Russian Foreign Economic Journal, Russian Foreign Trade Academy Ministry of economic development of the Russian Federation, issue 7, pages 79-92, July.
    9. Andrew Chapman & Hidemichi Fujii & Shunsuke Managi, 2018. "Key Drivers for Cooperation toward Sustainable Development and the Management of CO 2 Emissions: Comparative Analysis of Six Northeast Asian Countries," Sustainability, MDPI, vol. 10(1), pages 1-12, January.
    10. Mr. Takuji Komatsuzaki, 2016. "Improving Public Infrastructure in the Philippines," IMF Working Papers 2016/039, International Monetary Fund.
    11. Namrata Chindarkar & Dodo J. Thampapillai, 2018. "Rethinking Teaching of Basic Principles of Economics from a Sustainability Perspective," Sustainability, MDPI, vol. 10(5), pages 1-8, May.
    12. Amir Sadeghi, 2018. "How Public Investment Could Help Strengthen Iran’s Growth Potential: Issues and Options," IMF Working Papers 2018/129, International Monetary Fund.
    13. Maralgua Och & Christian Baerbig & Tsolmon Jadamba, 2017. "Determinants of Inward FDI in Mongolia: An Application of the ARDL Bounds Testing Approach to Cointegration," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(3), pages 307-333, March.
    14. Hadi Sasana & Achma Hendra Setiawan & Fitri Ariyanti & Imam Ghozali, 2017. "The Effect of Energy Subsidy on the Environmental Quality in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 245-249.
    15. Gan-Ochir Doojav, 2018. "The Effect of Real Exchange Rate on Trade Balance in a Resource-Rich Economy: The Case of Mongolia," Foreign Trade Review, , vol. 53(4), pages 211-224, November.
    16. Narantungalag, Odmaa, 2022. "The effects of natural resource extraction on household expenditure patterns: Evidence from Mongolia," GLO Discussion Paper Series 1077, Global Labor Organization (GLO).
    17. Kong, Qunxi & Guo, Rui & Wang, Yang & Sui, Xiuping & Zhou, Shimin, 2020. "Home-country environment and firms’ outward foreign direct investment decision: Evidence from Chinese firms," Economic Modelling, Elsevier, vol. 85(C), pages 390-399.
    18. Jayanthakumaran, Kankesu & Bari, Mohammad Tariful, 2021. "Resource boom and non-resource firms: Mongolia 2007 and 2011," Resources Policy, Elsevier, vol. 74(C).
    19. Ganchimeg Gombodorj & Karoly Peto, 2022. "Impact Of The Mining And Agriculture Sector On The Mongolian Economy," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 7(1), pages 74-85, March.
    20. Syed Hasan & Odmaa Narantungalag, & Martin Berka, 2022. "No pain, no gain? Mining pollution and morbidity," Discussion Papers 2203, School of Economics and Finance, Massey University, New Zealand.

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    More about this item

    Keywords

    Natural resources management; Debt sustainability; Public investment;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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