Macroeconomic Aspects in Resource-Rich Countries

Abstract

Natural resources represent a good opportunity for economic growth and development in many resource-rich countries. However, not all these countries have benefited from the wealth stemming from natural resources. The empirical evidence shows that the economic performance of many resource-rich countries is poorer than the average. This has come to be known as the "natural resource curse". The interesting questions are why do some countries perform badly despite their natural wealth, what are the mechanisms that cause lower growth rates and how can they be avoided. Different arguments have been proposed to explain the natural resource curse. Some authors claim that resource abundance elicits corruption and rent seeking. Others argue that the high volatility of commodity prices lead to macroeconomic volatility, and volatility harms economic growth. However, the soundest explanation for the natural resource curse is based on the notion of the Dutch disease. The first chapter of the thesis analyses the mechanism behind the Dutch disease. The extra wealth generated by the sale of natural resources induces an appreciation of the real exchange rate and a corresponding contraction of the traded sector. If we consider that most of the economic growth is caused by technological progress acquired through "learning-by-doing" (LBD) which is mainly present in the traded sector, a temporary decline in that sector may imply lower economic growth. A number of oil producing countries have attempted to avoid the Dutch disease through stabilization funds. The second chapter of the thesis analyses the economic consequences of stabilization funds. These funds permit oil producing countries to adjust government spending and cushion the domestic economy from the sharp and unpredictable variations in oil prices and revenue. Given that natural resources are exhaustible, the last chapter of the thesis looks for an optimal revenue distribution between current and future generations. Previous models based on the permanent-income hypothesis are enriched, including essential features of resource-rich countries, productive government spending and Dutch disease effects.