Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation

Torfinn Harding, Radoslaw Stefans and Gerhard Toews
Authors registered in the RePEc Author Service: Radosław Stefański

The Economic Journal, 2020, vol. 130, issue 630, 1715-1728

Abstract: We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. A giant discovery with the value of 10% of a country’s GDP appreciates the real exchange rate by 1.5% within ten years following the discovery. The appreciation starts before production begins and the non-traded component of the real exchange rate drives the appreciation. Labour reallocates from the traded goods sector to the non-traded goods sector, leading to changes in labour productivity. These findings provide direct evidence on the channels central to the theories of the Dutch disease and the Balassa–Samuelson effect.

Date: 2020
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Citations: View citations in EconPapers (32)

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Working Paper: Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation (2019)
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