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An investigation of a partial Dutch disease in Botswana

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  • Barczikay, Tamás
  • Biedermann, Zsuzsánna
  • Szalai, László

Abstract

Diversification of resource-driven economies has proven to be a very stubborn problem. Even relatively successful countries struggle to achieve a structural change towards manufacturing and high-tech industries. Botswana has been often cited as one of the few countries that escaped the resource curse and performed well in terms of economic growth. However, a significant share of the domestic output and most of the exports are still coming from the mining sector. In this paper we present the spending effect as a possible explanation for the lack of economic diversity. Using a nonlinear autoregressive distributed lag model, we investigate the cointegration of the diamond price index and the pula exchange rate against the currencies of Botswana's main trading partners on monthly time-series data. Our analysis is based on a recent dataset that covers the period from the introduction of the crawling band exchange regime until 2018. The results highlight a partial Dutch disease phenomenon related to Botswana's trade union partners: Namibia and South Africa.

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  • Barczikay, Tamás & Biedermann, Zsuzsánna & Szalai, László, 2020. "An investigation of a partial Dutch disease in Botswana," Resources Policy, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:jrpoli:v:67:y:2020:i:c:s0301420719309055
    DOI: 10.1016/j.resourpol.2020.101665
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    More about this item

    Keywords

    Diversification; Resource curse; Spending effect; Real exchange rate; Asymmetric cointegration; Nonlinear autoregressive distributed lag model;
    All these keywords.

    JEL classification:

    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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