Reconciling opposing views of the commodity boom

Anthony Makin

Economic Analysis and Policy, 2014, vol. 44, issue 2, 129-135

Abstract: This paper presents a new framework for reconciling contrasting interpretations of the impact of world commodity prices on the Australian economy. Focusing on the relative price of commodities to other goods and services rather than the real exchange rate, it shows that a commodity price boost alters the composition, but not the level of GDP, while simultaneously raising national expenditure and potentially creating a trade deficit which widens further with autonomous expenditure increases. Immigration and foreign investment facilitates long run economic growth, although this further contracts the non-commodity sector of the economy.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:44:y:2014:i:2:p:129-135

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