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Boom goes the price: giant resource discoveries and real exchange rate appreciation

Research output: Working paperDiscussion paper

Author(s)

Torfinn Harding, Radoslaw (Radek) Stefanski, Gerhard Toews

School/Research organisations

Abstract

We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. The size and plausibly exogenous timing of such discoveries make them ideal for identifying the effects of an anticipated resource boom on prices. We find that a giant discovery with the value of a country's GDP increases the real exchange rate by 14% within 10 years following the discovery. The appreciation is nearly exclusively driven by an appreciation of the prices of non-tradable goods. We show that these empirical results are qualitatively and quantitatively in line with a calibrated model with forward looking behaviour and Dutch disease dynamics.
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Details

Original languageEnglish
Place of PublicationSt Andrews
PublisherUniversity of St Andrews
Pages1-37
Number of pages37
Publication statusPublished - 21 May 2016

Publication series

NameSchool of Economics and Finance Discussion Paper
PublisherUniversity of St Andrews
No.1608
ISSN (Print)0962-4031
ISSN (Electronic)2055-303X

    Research areas

  • Carbon subsidies, Subsidies, Fossil fuels , Pollution, Energy, Carbon

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