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The Real Exchange Rate and the Fiscal Aspects of a Natural Resource Discovery

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  • Giavazzi, Francesco
  • Sheen, Jeff R
  • Wyplosz, Charles

Abstract

When natural resource income is appropriated by the government, the re arises the issue of the use made of this income. While the "Dutch disease" literature considers the intratemporal allocative issues, this paper focuses the intertemporal aspects implied by the exhaustibility of natural resources. Three main cases are considered: the government can use its resources to either reduce taxes, step up public spending, or reduce its indebtedness. These options are shown to have markedly contrasted effects on the exchange rate and the current account, both temporaril y and permanently. Copyright 1988 by Royal Economic Society.

Suggested Citation

  • Giavazzi, Francesco & Sheen, Jeff R & Wyplosz, Charles, 1988. "The Real Exchange Rate and the Fiscal Aspects of a Natural Resource Discovery," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 427-450, September.
    • Handle: RePEc:oup:oxecpp:v:40:y:1988:i:3:p:427-50
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    Cited by:

    1. Brahmbhatt, Milan & Canuto, Otaviano & Vostroknutova, Ekaterina, 2010. "Dealing with Dutch Disease," World Bank - Economic Premise, The World Bank, issue 16, pages 1-7, June.
    2. Marcus J. Kurtz, 2009. "The Social Foundations of Institutional Order: Reconsidering War and the “Resource Curse†in Third World State Building," Politics & Society, , vol. 37(4), pages 479-520, December.
    3. Artidiatun Adji & James Alm, 2016. "Testing for Ricardian Equivalence in Indonesia," Working Papers 1616, Tulane University, Department of Economics.
    4. Todd Schneider & Nabil Ben Ltaifa & Mr. Faisal Ahmed & Mr. Saade Chami, 2007. "Yemen: Exchange Rate Policy in the Face of Dwindling Oil Exports," IMF Working Papers 2007/005, International Monetary Fund.

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